Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Saturday, August 30, 2014
Winter watch ( August 30 , 2014 ) - Are Russia and Germany conniving to work around recalcitrant Ukraine regarding natural gas for Europe ? Association of European Businesses urges EU to refrain from sanctions against Russia ...... European Commission recommends Ukraine to start repaying Russian gas debt
( Ukraine needs 3 billion for their war with Novorussians and billions more to pay for Russian natural gas...... Pony up time , boys and girls ! )
Barroso suggests EU’s increased financial aid for Ukraine
August 30, 20:12UTC+4 “More than half a billion euros in loans and 250 million euros in grants have already been mobilized by the European Commission as part of this package,” the president of the European Commission said
BRUSSELS, August 30, /ITAR-TASS/. European Commission President Jose Manuel Barroso said on Saturday following his talks with Ukrainian President Petro Poroshenko in Brussels that the European Union was ready to increase financial aid for conflict-hit Ukraine.
“More than half a billion euros in loans and 250 million euros in grants have already been mobilized by the European Commission as part of this package,” the president of the European Commission said.
“Over one billion more (in loans) could be released in the coming months and we are ready to consider further financial assistance should additional needs be identified by the IMF during its next review mission,” Barroso said after the talks with the Ukrainian leader.
Poroshenko on Saturday addressed a summit of the European People's Party in Brussels. The Ukrainian leader came to Belgium upon an invitation extended earlier by President of the European Council Herman Van Rompuy.
Kiev is pinning hope on a new loan tranche from the International Monetary Fund to stabilize the country’s foreign exchange market.
The IMF Executive Board approved in late April a two-year stand-by loan facility for Ukraine worth a total of $17.01 billion to prop up Ukraine’s flagging economy. Ukraine received the first $3.19 billion tranche in early May 2014.
On Thursday, the Ukrainian government has instructed the Finance Ministry to sell $340 million to Ukraine’s central bank to replenish its foreign exchange reserves and prop up the rapidly depreciating national currency,
The Ukrainian hryvnia has been depreciating rapidly lately amid a further contraction in the county’s GDP and the continued armed standoff between east Ukraine self-defense militias and the pro-Kiev troops in the Donetsk and Luhansk regions.
The National Bank of Ukraine lowered the hryvnia official exchange rate by 1.68% against the US dollar on August 27 to a new record low of 13.89 hryvnias per US dollar.
Ukrainian Prime Minister Arseny Yatsenyuk earlier said the Ukrainian economy would not be able to function normally at an exchange rate of over 12 hryvnias per US dollar. The Ukrainian currency is currently trading at a rate of 16 hryvnias per US dollar on the black market.
Ukraine’s leader Poroshenko hopes for positive outcome of trilateral gas talks
BRUSSELS, August 30, /ITAR-TASS/. Ukrainian President Petro Poroshenko said on Saturday he hoped that trilateral gas talks involving his country, Russia and the European Union on the issue of the Russian gas supplies to Ukraine would end with a positive outcome.
“Ukraine highly evaluates measures undertaken by the European Commission and personally EU Commissioner Oettinger in talks between Ukraine and Russia with the participation of the European Union,” Poroshenko said. “I believe that the talks would end with a positive result.”
EU Energy Commissioner Gunther Oettinger visited Moscow on Friday with the aim of discussing the Ukrainian gas issue Russia. The commissioner held talks with Russian Energy Minister Novak and Gazprom CEO Alexei Miller in a bid to find a solution to the Russia-Ukraine gas price dispute.
Following the meeting with Oettinger, Russian Minister Novak said that the date for trilateral talks on the Ukrainian gas issue would be announced early next week.
However, Novak once again made it clear before the mooted talks that Russia was ready to resume natural gas supplies to Ukraine, if Kiev repays its $2 billion debt.
The Russian energy minister said this figure included Ukraine’s $1.4 billion debt for Russian natural gas deliveries to the ex-Soviet republic in 2013 and partial repayment of the gas debt accumulated from April.
The Russian energy minister also said Russia was prepared to offer Ukraine a gas price discount of $100 per 1,000 cubic meters, which would not breach contractual obligations and would not contradict Russia’s position in an international arbitration tribunal as this offer was not a corporate discount.
Russia raised the gas price for Ukraine from $268.5 to $485.5 per 1,000 cubic meters from April 2014. Ukraine has said it will not pay for Russian natural gas supplies at such a high price.
After Russia and Ukraine failed to reach a compromise on the gas issue, Naftogaz and Gazprom filed mutual claims to the Stockholm Arbitration Tribunal.
The gas price for Ukraine has increased, in particular, by $100 per 1,000 cubic meters since April 1, 2014 after Russia denounced the 2010 Kharkov accords on extending the lease of the Russian Black Sea Fleet’s base in Crimea in exchange for a gas price discount. The accords were denounced after the Black Sea peninsula joined Russia in the spring of 2014.
Russia also offered Kiev the second discount as part of an anti-crisis aid package for Ukraine in November 2013 but scrapped it from April 1, 2014 over Ukraine’s failure to repay its debts for Russian natural gas supplies.
Gazprom halted gas supplies to Ukraine in June over its unpaid debt and filed a $4.5 billion suit to the Stockholm arbitration court. Later, Kiev reciprocated by sending a suit to the court against Gazprom for making Ukraine overpay $6 billion for gas since 2010, setting too high prices in its contract.
Diversification of Russian gas supply to Europe to cover up to 50% of EU needs — minister
August 29, 17:02UTC+4 Russian Energy Minister Alexander Novak says Gazprom was rather actively diversifying the supply risks, pumping additional gas volumes into European underground storage facilities
MOSCOW, August 29. /ITAR-TASS/. Diversification of Russian natural gas supplies to Europe will cover up to 50% of Europe’s gas demand, Russian Energy Minister Alexander Novak told reporters on Friday.
He said that Russia’s natural gas monopoly Gazprom was rather actively diversifying the supply risks, pumping additional gas volumes into European underground storage facilities, which will make it possible to increase gas consumption during the winter peak season.
“Moreover, it (Gazprom) increases the gas pumping capacities in accordance with the additional technical solutions on the Yamal-Europe gas pipeline. We also discussed today the supply of additional gas volume through the OPAL pipeline, which will give a 40-50% compensation for the possible deficit if Ukraine consumes maximum gas volumes supplied for the EU,” Novak said.
The Yamal-Europe transnational gas pipeline runs through Russia, Belarus, Poland and Germany. The pipeline’s total length exceeds 2,000 kilometres, capacity - 32.9 billion cubic metres per year.
The OPAL gas pipeline with the capacity of 36 billion cubic meters runs across Germany, connecting the new trans-Baltic pipeline Nord Stream with the existing gas transportation networks. Russia and Germany seek this pipeline’s exemption from the EU Third Energy Package norms that allow Gazprom to use only half of the pipeline’s capacity.
Association of European Businesses urges EU to refrain from sanctions against Russia
August 30, 8:10UTC+4 The AEB issued a news release with this call ahead of European Council meeting that will be discussing the possibility of more sanctions on Russia over the latest developments in Ukraine
MOSCOW, August 30, 3:26 /ITAR-TASS/. The Association of European Businesses incorporating several thousand companies operating in Russia or in contact with Russian partners has urged the EU heads of state to refrain from taking more economic sanctions against Russia.
The AEB issued a news release with this call ahead of European Council meeting that will be discussing the possibility of more sanctions on Russia over the latest developments in Ukraine.
“The previous sanctions were ineffective as they did not change the course of the events. Moreover they are deeply damaging to business conditions and to the markets, not only in Russia and Ukraine but also in the EU,” the AEB said.
The AEB asked the EU heads of states and government “to keep business, which creates wealth, jobs and stability, out of politics and to solve the Ukrainian crisis diplomatically.”
This is not the first time the AEB is addressing the EU and Russia to refrain from sanctions. In early August the association’s members asked the EU and Russian authorities to protect investors on both sides from any further retaliatory restrictive measures.
The Association of European Businesses was established in 1995. Currently it unites 630 companies in the EU countries and Russia. Among its members there are both transnational giants, including Bonduelle, Nestle, Valio and Auchan and medium and small businesses.
On August 7 Russia retaliated to Western sanctions imposed over events in Ukraine. It prohibited all import of beef, pork, vegetables, fruit, poultry, fish, cheese, milk and dairy products from the European Union countries, Australia, Canada, Norway and the United States.
Ukraine does not agree to Russia’s $100 gas price discount — ministry
August 29, 20:06UTC+4 Ukraine Energy Minister Yuriy Prodan said that Ukraine was disappointed “by the absence of a constructive approach from Russia at the talks on settling the issue of natural gas supplies to Ukraine”
MOSCOW, August 29. /ITAR-TASS/. Ukraine does not agree to a $100 gas price discount offered by Russia, the Ukrainian Energy and Coal Ministry said on Friday.
Russian Energy Minister Alexander Novak said on Friday after talks in Moscow with EU Energy Commissioner Guenther Oettinger and Gazprom head Alexei Miller that Russia was ready to offer Ukraine a $100 discount for its contractual price of $485 per 1,000 cubic meters as a compromise option to settle the gas dispute between Moscow and Kiev.
Ukrainian Energy and Coal Minister Yuriy Prodan said, however, that Ukraine was disappointed “by the absence of a constructive approach from Russia at the talks on settling the issue of natural gas supplies to Ukraine.”
“We again hear the price of $385 based on a $100 discount from the price of $485 due to the duty cancellation. This means that the Russian side considers the price of $485 to be fair and consistent with market trends. However, we believe this is a discriminatory price,” the Ukrainian Energy and Coal Ministry’s press office quoted Prodan as saying.
Prodan said Ukraine had made several proposals, including jointly with the European Commission, on really market-based pricing mechanisms.
“Our latest proposal is to calculate the price proceeding from spot prices on European gas hubs, reducing it by the amount of costs for gas transportation from the Russian border to EU countries,” Prodan said.
European Commission recommends Ukraine to start repaying Russian gas debt
BRUSSELS, August 29,/ITAR-TASS/. The European Commission recommends Ukraine to start delivering payments for the supplies of Russian natural gas, Marlene Holzner, a spokeswoman for EU Energy Commissioner Gunther Oettinger, said on Friday.
She said that in the course of the next weeks the European Commission would work out a schedule for Ukraine’s debt repayments to resume deliveries of the Russian natural gas.
Gazprom says Naftogaz’s debt under the “take or pay” clause has already exceeded $11 billion.
Russian energy giant Gazprom halted gas supplies to Ukraine in June over its unpaid debt and filed a $4.5 billion suit to the Stockholm arbitration court. Later, Kiev reciprocated by sending a suit to the court against Gazprom for making Ukraine overpay $6 billion for gas since 2010, setting too high prices in its contract.
Gazprom CEO Alexei Miller said that Gazprom had not received any signal from Naftogaz about the Ukrainian company’s readiness to repay debts for natural gas supplied to Ukraine in previous months. Gazprom says this debt has already topped $5 billion.
Brussels and Kiev have elaborated a joint position that gas prices for Ukraine should be at the level of $320 per 1,000 cubic meters during the summer season until mid-October and $385 per 1,000 cu m during the heating season. Ukraine however, earlier rejected a seasonal scheme proposed by Gazprom.
At a meeting held in Minsk on Tuesday between the leaders of Russia, Belarus and Kazakhstan, which form the Customs Union, EU officials and the Ukrainian president, Russian Energy Minister Novak said that Russia’s position was unchanged and Ukraine must repay its $5 billion debt to continue cooperation with Moscow.