Russia Sacrifices Gazprom Profit for Politics in Ukraine

Posted by Eric Haun
Friday, April 04, 2014

Russia's top natural gas producer, Gazprom, will eventually lose more than it gains from raising the gas price for Ukraine by 80 percent, analysts said on Friday, predicting Kiev would cut purchases and fail to pay in full.

Gazprom on Thursday announced a price rise for Ukraine to $485 per 1,000 cubic metres, the second increase in three days. The $485 price is the highest of any Gazprom customer and compares with around $370 on average for clients in the European Union.

Ukrainian Prime Minister Arseny Yatseniuk said the increase, two weeks after Moscow annexed Ukraine's Crimea region, was unacceptable and warned he expected Russia to step up pressure by limiting supplies to Ukraine.

"Even if the price is legally justified, it would hurt Gazprom's image, will hit capitalisation and, indirectly, the whole Russian stock market," Valery Nesterov from Sberbank CIB said.

Analysts including Nesterov estimated that Gazprom could lose around $2 billion this year from the move.

Previous pricing spats have prompted Russia to halt supplies of gas to Ukraine, with consequent cuts in gas flows to Europe, where Russia meets 30 percent of demand.

Analysts said Gazprom may turn the taps off again, although immediate cuts are unlikely because of lower gas demand now that winter has ended.

Around half the Russian gas delivered to Europe goes through Ukraine, which ships it to Europe from storage sites in the west of the country.

"Ukraine is unable to fill up its gas storage facilities at this price. Without Ukrainian storage gas, Gazprom is unable to fulfil its European export contracts," Mikhail Korchemkin at East European Gas Analysis said.

Pressure on Ukraine
The two price rises ratchet up pressure on the former Soviet republic following the ouster of President Viktor Yanukovich, who had won a price cut from Russia after aborting plans to sign political and trade pacts with the European Union in November.

Gazprom said it would raise the gas price from $268.50 starting this month after Kiev failed to pay its gas debt of around $2.2 billion on time and after the Russian government introduced an export fee of around $100 per 1,000 cubic metres.

"With a price like this, Ukraine is likely to continue importing gas and increase its debt. This will go on until they decide whether to go to an arbitration or until Russia decides to cut gas supplies to Ukraine," said Valentin Zemlyansky, a former spokesman for Ukrainian state energy company Naftogaz who says he is an independent analyst.

Analysts said the jump in the gas price is detrimental to the fragile economy in Ukraine, which would swiftly run into problems paying.

"The price looks unrealistic for the long term," Nesterov said.

Last year, Gazprom sold 25.8 bcm of gas to Ukraine worth $12 billion, down from 33 bcm in 2012. Russia now meets around half of Ukraine's gas needs.

Nesterov said that Ukraine is likely to buy less than the 25-27 bcm previously expected for this year. He estimated that Gazprom would lose $2 billion this year from the price hike and introduction of an export duty, while its production would decline by up to 5 percent.

Alexei Kokin, of Uralsib Capital, also expected Gazprom to lose about $2 billion this year as a result of the price hike for Ukraine, which he predicted would cut gas purchases from Russia to 20 bcm this year and to 15 bcm in 2015.

Analysts said the crisis could drag on until winter - the season when Gazprom has cut gas supplies to Ukraine in past pricing rows.

"I think a gas conflict will happen in the winter," Kokin said.

(By Vladimir Soldatkin and Denis Pinchuk; additional reporting by Pavel Polityuk in Kiev; editing by Jane Baird)

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter May 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Tanker Trends

A Year is a Long Time in Tankers

The latest Gibson Market Report focused on the age profile of the VLCC fleet and the prospects for trading life beyond 15 years of age.    Analysis of the Suezmax fleet shows a similar picture,

Strike In France: Implications for Tanker Demand

After the oil industry suffered from a severe drought in Venezuela, forest fires in Canada and rebel attacks on oil installations in Nigeria, it is now facing

Floating Storage Flattens Fortunes of $50 Crude

The prices of WTI and Brent crude briefly rose above $50/bbl during intraday trading on Thursday, the highest level seen since the end of July 2015, giving traders a brief moment of optimism,

Finance

Defense Appropriations Bill Includes $1 Bln for US Icebreaker

The U.S. Senate Appropriations Committee’s FY2017 Defense Appropriations Bill has included $1 billion in funding to accelerate construction of a new polar icebreaker for the U.

Higher Capesize Demand Pushes up Baltic Index

The Baltic Exchange's main sea freight index, tracking rates for ships carrying dry bulk commodities, rose on Friday buoyed by higher demand for capesize vessels.

TT Club Reports Robust Financial Results for 2015

TT Club has announced its financial results for the year ended December 31, 2015, and AM Best affirms its A- (Excellent) rating for the 10th consecutive year.   Knud Pontoppidan,

Energy

Strike In France: Implications for Tanker Demand

After the oil industry suffered from a severe drought in Venezuela, forest fires in Canada and rebel attacks on oil installations in Nigeria, it is now facing

Floating Storage Flattens Fortunes of $50 Crude

The prices of WTI and Brent crude briefly rose above $50/bbl during intraday trading on Thursday, the highest level seen since the end of July 2015, giving traders a brief moment of optimism,

GloMEEP Project Forges Ahead with Train-the-Trainer Workshop

A global Train-the-Trainer workshop on energy efficiency has been delivered in China (23-27 May), preparing the personnel needed to cascade knowledge on energy

News

Deployment: The Transpacific Trade Steps Up To The Plate

In 2015, it was the Asia-Europe route which was the focus of changing deployment trends, says Clarksons Research.   This year, it is the Transpacific trade which

US Navy Updated Zika Virus Infection Guidance

Navy Medicine released updated Zika Virus Infection guidance in NAVADMIN 121/16, May 26, communicating current information, travel precautions, and risk reduction

CBP, AMO Unveils New Interceptor Vessel

U.S. Customs and Border Protection (CBP) Air and Marine Operations (AMO) and SAFE Boat International celebrated the unveiling of AMO’s newest coastal interceptor vessel (CIV) Thursday.

Government Update

1,076 Graduate from U.S. Naval Academy

The U.S. Naval Academy graduated 1,076 men and women at the annual graduation and commissioning ceremony May 27 at Navy-Marine Corps Memorial Stadium. U.S. Naval Academy Superintendent Vice Adm.

Details El Faro's Sinking Emerge from US Probe

U.S. investigators on Friday concluded two weeks of hearings into the sinking of cargo ship El Faro in a hurricane last fall that included reports the vessel had

Defense Appropriations Bill Includes $1 Bln for US Icebreaker

The U.S. Senate Appropriations Committee’s FY2017 Defense Appropriations Bill has included $1 billion in funding to accelerate construction of a new polar icebreaker for the U.

Logistics

Greek Shipping – Still Number One!

Despite the many domestic and market challenges facing the Hellenic ship owning community, Greece has continued to strengthen its position as the largest ship owning nation in recent years,

A Year is a Long Time in Tankers

The latest Gibson Market Report focused on the age profile of the VLCC fleet and the prospects for trading life beyond 15 years of age.    Analysis of the Suezmax fleet shows a similar picture,

Deployment: The Transpacific Trade Steps Up To The Plate

In 2015, it was the Asia-Europe route which was the focus of changing deployment trends, says Clarksons Research.   This year, it is the Transpacific trade which

 
 
Maritime Security Maritime Standards Navigation Offshore Oil Pipelines Pod Propulsion Salvage Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1210 sec (8 req/sec)