Russia Declared Another Gas War to Ukraine

November, 2008

Russia’s gas monopoly Gazprom has threatened to hike the gas price for Ukraine to above $400 per a thousand cu meters if NAK Naftogaz fails to pay off the $2.4-billion debt. RF President Dmitry Medvedev confirmed yesterday the seriousness of monopoly’s intention. Nowadays, Gazprom needs Ukrainian money not only for political but also for economic reasons. It expects arrears on domestic market and the 1.5-percent reduction in the annual production target, i.e. the monopoly will lose $2 billion of the target net profit. “When transferring to market relations in part of the gas supplies to Ukraine, the price will be probably above $400 starting from January 1, 2009,” says the statement of Gazprom CEO Alexei Miller that the monopoly provided to top news agencies past night. Today’s price is $179.5 per a thousand cu meters. That day earlier, Miller had a meeting with President Dmitry Medvedev, where he reported on progress in the long-term negotiations with Ukraine. Under the draft agreement, the parties will shift to the market prices from January 1, 2011. But there is a stumbling block. “The issue of debt hasn’t been settled. The Ukrainians owe $2.4 billion to us,” Miller told the president yesterday. The response of Medvedev was tough. “It is big money for any state and for any company, including Gazprom,” the president pointed out, committing the gas chief to finally sort out the situation and collect the debt either on voluntary basis or by force. The tricky point is that Ukraine hasn’t acknowledged the claims of Russia. Naftogaz Deputy CEO Vladimir Trikolich said his company’s debt to RosUkrEnergo (the sole gas supplier to Gazprom, where Gazprom has 50 percent) for this year’s supplies doesn’t exceed $1.26 billion to $1.27 billion “with regard to all nuances” and Naftogaz has no debts to Gazprom. According to Andrei Knutov from RosUkrEnergo, the penalties for delayed payment reached $300 million and November supplies of nearly $900 million haven’t been paid yet. The sources say that, early this week, Gazprom offered to Naftogaz to set off the $2.4-billion arrears by the transit payments for 2009 and 2010. The rate will be fixed at today’s level, $1.7 per a thousand cu meters for 100 kilometers. But Ukraine rejected the proposal on Wednesday. Official Kiev didn’t comment on the gas war escalation yesterday.


Ukraine to Settle Gas Debt in 5 Days

Ukrainian government has five days to settle arrears for gas supplies. Ukrainian President Viktor Yushchenko made the respective statement today, during the sitting of the National Security and Defense Council, RBC-Ukraine reported. The $2 billion debt of Naftogaz is the personal responsibility of Prime Minister Yulia Tymoshenko, the president said, emphasizing that the gas policy of the government leads to Ukraine’s colonization. The government hasn’t paid for the gas imported far back in the first quarter, the president pointed out, adding that the 2009 price should be economical rather than political. At the same time, the president went on, the economy should be taken into account also when calculating the rent for the land occupied by the RF Black Sea Fleet and the cost of gas transit and storage. Yesterday, Russia’s president Dmitry Medvedev committed Gazprom CEO Alexei Miller to collect from Ukraine the gas debt of $2.4 billion either on voluntary basis or by force. But according to Naftogaz, it owes no more than $1.267 billion. Miller insists that Ukraine doesn’t pay its debts, which amount is amassing. The issue of debt settlement delays signing of gas contracts of Russia and Ukraine despite the high extent of their readiness. To set the process into motion and to execute the president’s order, Gazprom has threatened to hike the gas price to above $400 per a thousand cu meters for Ukraine starting from January 1, 2009.


In other news:

Georgia Cedes Its Natural Gas Network to Azerbaijan

Georgia agreed to hand over the ownership of its natural gas network, which includes the transit gas pipeline from Russia to Armenia, to the Azerbaijani government, news agencies reported. Under the November 14 deal, announced by Georgian leader Mikheil Saakashvili the next day, Azerbaijan would satisfy the bulk of Georgia's natural gas needs in 2009-13 at below-market prices. The deal was finalized during an energy summit in Baku that brought together a number of central and eastern European heads and senior officials of states interested in Caspian energy. Also at the summit, Kazakhstan agreed to expand its oil shipments via Azerbaijan, Georgia, and Turkey through the Baku-Tbilisi-Ceyhan pipeline built with U.S. support.

"Property for debt"

Georgia's deal with Azerbaijan is similar to Armenia's deal with Russia, exchanging formal ownership of the gas network - that could potentially serve as political leverage - for a temporary reprieve in prices. Until this year, like Armenia, Georgia bought most of its natural gas from Russia. Moscow reportedly came close to buying the Georgian gas network, but the offer was declined by Tbilisi on the U.S. government's insistence, which was concerned with integrity of non-Russian gas supplies. Although the Georgian-Russian border is closed and official relations are suspended, Russia continues to supply Georgia, and by extension Armenia, with natural gas. The biggest gas consumers in Georgia - the Tbilisi electricity network and a chemical plant - are owned by Russian companies. While Russian-Georgian talks on South Ossetia and Abkhazia resume in Geneva this week, no normalization in relations is anticipated any time soon. Speaking at the Council on Foreign Relations in Washington on November 15, President Dmitry Medvedev said that Russia was "ready to build relations with Georgia." "But not with the current [Saakashvili] regime," Mr. Medvedev said. "That is a red line, which we cannot cross."

Armenia impact

Azerbaijan has now promised to cover more than 60 percent of Georgia's overall gas needs - estimated at 1.8 billion cubic meters of gas a year - at below-market prices. The rest of the supplies to Georgia would still need to come at market prices from Azerbaijan, Russia, or Iran. Armenia imported more than 2 billion cubic meters of gas from Russia last year. In addition to the now Azerbaijani-owned Georgian transit pipeline, Armenia can now potentially import natural gas from Iran - an important safeguard should new problems arise in supplies via Georgia. The Iran option also becomes more attractive as Russia will begin to raise prices for its supplies starting next year. Consequences for Armenia of the Georgia deal may become apparent soon. Azerbaijan and Turkey had previously used a promise of lower gas prices to Georgia as leverage against Armenia in the form of Georgian support for the Kars-Akhalkalaki rail bypass and other projects. The Russian-Georgian war already disrupted air and other traffic between Russia and Armenia. Media reports suggested that Georgia was trying to prevent Russian military cargo, including those resupplying its military base in Gyumri, from reaching Armenia. Considering the continued importance of Georgia transit to Armenia, it is not surprising that both President Serge Sargsian and Defense Minister Seyran Ohanian have visited Georgia since the August war, and Prime Minister Tigran Sarkisian is expected to go soon.


U.S. Intelligence Predicts Conflicts

The U.S. National Intelligence Council has prepared a report on the planet’s future for the next 15 years, Agence France Presse reported on Thursday. The intelligence service foresees a growing threat of the use of nuclear arms. It also predicts that global warming will benefit Russia and the U.S. dollar will lose its dominant role as a world currency. The agency prepares a report every four years. This year’s report is entitled “Global Trends 2025: A Transformed World.” The excerpts from the report published by the Associated Press indicate that global warming will increase access to oil fields in Russia and Canada and strengthen the economies of those countries. Russia’s prosperity is threatened by organized crime, corruption and lack of investments, however. The analysts also stated that organized crime may take control over the government of one Central-Eastern European country. Countries in Africa and South Asia can expect destabilization and weakening government control. The role of non-Arab Islamic countries in the world, particularly of Indonesia and Turkey, will grow. Iran may become stronger, if it rejects its theocratic regime. The global role of the United States will decrease as it redirects its resources inward to fight domestic problems. Its economic power will suffer from increasing energy dependence and the dollar will become “first among equals” among world currencies. On the whole, the world will become more explosive because of increasing struggles over food, water and energy resources. Aggressive nationalistic regimes and terrorist groups will become more active and will have greater access to nuclear weapons. The Al-Qaeda network may soon go into decline, however, because the extreme ideology of the terrorists and their inability to achieve their unrealistic goals do not allow them to become a mass movement.


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Dear reader,

Arevordi will be taking a sabbatical to tend to personal matters. New blog commentaries will henceforth be posted on an irregular basis. The comments board however will continue to be moderated on a regular basis.

The last 20 years or so has also helped me see Russia as the last front against scourges of Westernization, Globalism, American expansionism, Zionism, Islamic extremism and pan-Turkism. I have also come to see Russia as the last hope humanity has for the preservation of classical western civilization, Apostolic Christianity and the traditional nation-state. This realization compelled me to create this blog in 2010. Immediately, this blog became one of the very few voices in the vastness of cyberia that dared to preach about the dangers of Globalism and the Anglo-American-Jewish alliance, and the only voice preaching the strategic importance of Armenia remaining within Russia's orbit. From about 2010 to 2015 I did monthly, at times weekly, commentaries about Russian-Armenian relations and Eurasian geopolitics in general. It was very difficult as I had no assistance in this endeavor. The time I put into this blog therefore came at the expense of work and family. But a powerful feeling inside me urged me to keep going; and I did.

When Armenia finally joined the EEU and integrated its armed forces into Russia's military structures a couple of years ago, I finally felt a deep sense of satisfaction and relaxation, as if a very heavy burden was lifted off my shoulders. I finally felt that my personal mission was accomplished. I therefore felt I could take a step back, as I really needed the rest. Simply put: I have lived to see the institutionalization of Russian-Armenian alliance. Also, I feel more confident now that Armenians are collectively recognizing the strategic importance of Armenia's ties with Russia. Moreover, I feel satisfied knowing that, at least on a subatomic level, I had a hand in the outcome. As a result, I feel a strong sense of mission accomplished. I therefore no longer have the urge to continue as in the past. In other words, the motivational force that had propelled me in previous years has been gradually dissipating because I feel that this blog has lived to see the realization of its stated goal. Going forward, I do not want to write merely for the sake of writing. Also, I do not want to say something if I have nothing important to say. I feel like I have said everything I needed to say. Henceforth, I will post seasonal commentaries about topics I find important. I will however continue moderating the blog's comments section on a regular basis; ultimately because I'm interested in what my readers have to say and also because it's through readers here that I am at times made aware of interesting developments.

To limit clutter in the comments section, I kindly ask all participants of this blog to please keep comments coherent and strictly relevant to the featured topic of discussion. Moreover, please realize that when there are several anonymous visitors posting comments simultaneously, it becomes very confusing (not to mention extremely annoying) trying to figure out who is who and who said what.Therefore, if you are here to engage in conversation, make an observation, express an idea or simply attack me, I ask you to at least use a moniker to identify yourself. Moreover, please appreciate the fact that I have put an enormous amount of information into this blog. In my opinion, most of my blog commentaries and articles, some going back ten-plus years, are in varying degrees relevant to this day and will remain so for a long time to come. Articles in this blog can therefore be revisited by longtime readers and new comers alike. I therefore ask the reader to treat this blog as a depository of important information relating to Eurasian geopolitics, Russian-Armenian relations and humanity's historic fight against the evils of Globalism and Westernization.

Thank you as always for reading.