Moon of Alabama Brecht quote
January 12, 2009

The Ukraine Lost The Gas Dispute

The Ukraine did not pay for some of the natural gas it received last year from Russia and did not agree to a more market oriented higher price for future deliveries. Russia therefore stopped to deliver the gas the Ukraine needs. The Ukraine then siphoned gas off the transit pipelines that go from Russia through the Ukraine to other European countries.

Alarmed as some of its members are very dependent on reliable gas delivery from Russia the European Union stepped in. While the U.S. reliably accused Russia in this game the EU effectively took the Russian side.

It negotiated for monitor teams to watch over the transit lines in the Ukraine and pressured Ukraine to sign up to such a deal. Russia insisted that such an agreement must be in writing and fully signed before it would revive gas delivery.

While the Ukraine verbally committed to such an agreement, it tried to fudge the deal at the last minute it by attaching a signing statement:

At issue was a handwritten phrase that Ms. Tymoshenko wrote beside her signature early Sunday morning, after the document had already been signed by Mr. Putin. In English, she wrote, “with declaration attached.”

Ms. Tymoshenko’s declaration, a copy of which was obtained by The New York Times, said that Ukraine had not been guilty of stealing gas from the export pipelines, a statement essentially asking Moscow to backpedal on the allegation that had underpinned its justification for halting shipments to Europe.

One wonders who asked Ms. Tymoshenko to do such a stupid stunt. And why in English and why leaking it to the NYT?

A similar trick has been tried by the Georgian president Saakashvili in the ceasefire agreement mediated by Sarkozy last summer. The Russians did not fall for it then and they did not fall for it this time. Medvedev insisted on a clean contract.

The EU put even more pressure on the Ukraine and this morning the signing statement was retracted from the deal:

The new version followed a phone call between Russian Prime Minister Vladimir Putin and European Commission President Jose Manuel Barroso, and will be separate from a handwritten declaration from the government of Ukrainian Prime Minister Yulia Timoshenko that hours earlier caused the Russian side to threaten to pull out of the deal.

“Barroso has spoken to Timoshenko and they have agreed to separate the two documents,” commission spokesman Ferran Tarradellas Espuny in Brussels said late yesterday. “On one side the declaration and on the other side the terms of reference.”

Now the EU countries will again get das from Russia. The pipelines will be controlled by EU monitor teams and the Ukraine will not be able to steal from the Russian deliveries without international notice.

The Ukraine itself will still not get any gas unless it agrees to price changes and comes up with the arrears. Its ability to pressure Russia is now about zero. Its standing with the EU and those people freezing in Eastern Europe has sunken to a new low.

The U.S. strategy of pushing the Ukraine onto the EU and NATO has for now failed. This is a big win for Russia and a win for the European Union which has again shown its ability to help single member states.

Timoshenko, Yushchenko and their U.S. supporters have lost big time.

Posted by b on January 12, 2009 at 9:35 UTC | Permalink


I heard about the agreement on this morning's news, but not the details you've clarified.

Thanks b, as usual.

Posted by: Hamburger | Jan 12 2009 10:12 utc | 1

thanks b

The U.S. strategy of pushing the Ukraine onto the EU and NATO has for now failed.


Posted by: annie | Jan 12 2009 13:02 utc | 2

and you will never hear the details in the MSM either. Now I do not know for an absolute fact that Ukraine had not paid for most or all of its NG last year but if it's true it's the biggest part of this entire story. It should be stated in the first paragraph of every story. Not the silly, 'those dirty Russians are using their power to hurt and punish our friends for no reason.'

I'm not defending Russia but am defending markets. The crash in oil prices has had a devastating effect on Russia. From the emotional high of August with the Georgia 'victory' and $100+ bbl oil, till now, have taken a mighty fall. Especially Putin's elites. That is good but the volatility in oil was the result of our, meaning the Feds and the financial elites dirty self serving monetary policies and financial structures.

Posted by: rapier | Jan 12 2009 13:02 utc | 3

Is Russia paying "market value" for the transit fees for the pipeline/pumping of the gas through Ukraine?
I believe it was one of Ukraine's contentions that it wasn't.

Posted by: JohnK | Jan 12 2009 14:29 utc | 4

The mysterious rise and crash in the price of oil demonstrates that the US is still the marketmaker. That is to say, the US still controls the two lifebloods of civilization: oil and money, and the two are integrally related.

The process by which this manipulation occurs, despite all of our studying here, is thoroughly opaque to us. As in the parable of the cave, all we are allowed to see are the shadows on the wall -- the effects of actors and actions we don't understand: Peak oil sites popping up all over the web, trillions of dollars "lost" or transfered before our eyes, the phoenix-like rise of the opium trade.

Boom and bust cycles are the very heartbeat of Capitalism, and those who control the cycles can always surf the never-ending wave of "riches beyond the dream of avarice." By this mysterious fountainhead is wealth eternally concentrated towards the top while the bottom toils interminably.

Busted, down on Bourbon Street
Set up, like a bowling pin
Knocked down, it gets to wearin' thin
They just won't let you be

And just which nations have been set up and knocked down by oil? Why Venezuela, Russia and Iran, big surprise.

And who by fire, who by water.....

Why Iceland, and the middle-class, who have watched as their life savings and pensions have vanished before their eyes.

While there is much we do not understand, I again point readers to this article on The Ukraine, Ukraine: A key geopolitical battleground between Russia and the West, which describes the processes affecting it quite clearly.

We will be talking about the Ukraine quite a bit over the next year or two. In the mystifying parlance of the media, designed to confuse rather than clarify, it will suddenly become another "flashpoint."


Everything moves, everything passes, and there is no end.
Where did it all disappear? From where did it all come?
Both the fool and the wise man know nothing.
One lives… one dies… one thing blooms,
But another has withered, withered away forever…
And winds have carried off yellowed leaves,
And the sun will rise, as it used to rise,
And crimson stars will float off as they used to,
They will float afterwards, and you, white-faced one,
Will saunter along the blue sky.


In captivity, alone there is no one
With whom to join your heart.
Alone, I’m searching for someone
To talk to.
I’m searching for God, but I find only
That God forbid I say it.
This is what the years and cruel fate
Have done to me; add to this
That my precious youth
Has passed in clouds, that there isn’t
Even a single event
That’s worth recalling.
But you have to comfort your soul,
For it so wants, so pleads at least
For a word of peace. You can’t hear,
It’s as though the snow in the field is
Drifting over a still warm corpse.


When I die, bury me
On a grave mound
Amid the wide-wide steppe
In my beloved Ukraine,
In a place from where the wide-tilled fields
And the Dnipro and its steep banks
Can be seen and
Its roaring rapids heard.


Taras Shevchenko

Posted by: Malooga | Jan 12 2009 15:20 utc | 5

Because the US is on an aggressive mission to make countries bordering Russia members of NATO, I wouldn't be the least bit surprised to learn that the US is behind Ukraine's efforts (similar to the way it was behind Georgia's efforts) to portray this former Soviet state as a victim of Russian aggression.

My take on all this is that the US is behind this demonization of Russia as a way of gaining more power and influence in the world. Just as the US has teamed up with Israel to demonize Islam and Muslims in order to gain a stronger foothold in the Middle East, it is now teaming up with former Soviet states to demonize Russia and its allies in order to gain a stronger foothold in Europe.

But because US military adventures abroad are proving to be a huge drain on its economy, I wish with all my heart that the US would declare its empire days a thing of the past and get back to the business of tending to its own land and its own people before it's too late -- before it evolves into a nation with a third-world status!

Posted by: Cynthia | Jan 12 2009 16:17 utc | 6

Since Yeltsin, USUK has tried to dismantle Russia and plunder its resources using London, New York, and Israel based economic "advisers" and "oligarchs". Putin called a halt to this plunder, so he will continue to be reviled by western media propaganda apparatchiks. The neocon oriented Obama foreign policy/economic team does not indicate a change in USUK's anti Russian policy. The opposite, in fact.

Here is a good article on the mechanics of the color revolutions, The New Gladio in Action?

Posted by: Thrasyboulos | Jan 12 2009 17:11 utc | 7


And people here in the U.S. have a hard time buying that our own elections are rigged.

Posted by: David | Jan 12 2009 17:30 utc | 8

Sorry to hijacK, new onlive TV, interview on phosphorous in gaza right now:

Errbody Download Livestation Now Diary:

Posted by: dai | Jan 12 2009 17:56 utc | 9

And people here in the U.S. have a hard time buying that our own elections are rigged.

Nooooooo, can't be. Our betters on the Supreme Court tell us that money equals free speech and that we have plenty of diversity in the media. When the candidate with more money AND better corporate-owned media coverage wins 99.99% of the time, who worries about black-box voting? Nobody thinks it strange that 0.01% of politicians should die in plane crashes or shot by "lone gunmen."

Posted by: Malooga | Jan 12 2009 18:03 utc | 10

@ Malooga #10

Supreme Court Overturns Bush v. Gore

Posted by: dan of steele | Jan 12 2009 19:21 utc | 11


Ya got me there for a minute!

I love the Onion, and the article is not only a screamer, but very astute too.

I couldn't help but noticing that picture of Bush in "his" pick-up truck and reflecting on it a bit.

Remember how we were constantly bombarded with images like this when Bush was hatching and pushing his most undemocratic plans? A real "Man of the People." We haven't seen those pictures for several years now because they are no longer necessary.

We should remember that the guys who do PR for a living don't really care which party they work for, or even who they are married to. It's all just a job. So let's be vigilant when we are treated to photo-ops of Obama body surfing, or growing papayas, or whatever image they seek to construct for him. It is not intended for our edification, but for our distraction.

Posted by: Malooga | Jan 12 2009 19:48 utc | 12

"Signing Statements" that are the equivalent of crossed fingers held behind one's back are a great legacy of the Bush administration. I am glad to see them being introduced into international affairs as well.

Posted by: ralphieboy | Jan 13 2009 8:17 utc | 13

Ukraine paid off most of its gas debt (i believe only the debt for december deliveries is outstanding, and maybe even not that by now - this is what Ukraine claims and Russia does not contest). The conflict is primarily about future prices.

Transit payments - Ukraine has a contract that requires it to provide transit for $1.7/thousand cubic meters for 2 more years. European rates are about $4.7. The majority of transit expenses are costs of technological gas (it takes 5-7% of gas stock to move the remainder from eastern to western border of Ukraine), so transit costs are somewhat proportional to gas cost. The contract was written with the assumption that Ukraine would get its gas with deep discount, but it does not say so explicitely. So now it is a deathtrap - if Ukraine has to buy transit gas (as it contractually should) at market rates (as Russia now demands), it will lose $2.5 bn per year instead of earning money from its most reliable cash source.

I do not expect Russia will really demand this - this is obviously unfair, and while Ukraine was stupid to sign a contract like this, forcing it into financial suicide would be unwise - it will get a new transit contract at market rates, and will have to pass nearly all that money back to Gasprom for gas.

One final thought is that if EU monitoring comission is established permanently, and Ukrainian sovereignity over transit network, and ability to divert gas, is limited, it is no longer neccessary to build Nord pipeline that bypasses Ukraine under baltic sea. Russia has its gas production slowly falling, so old pipelines are sufficient for short-to-medium future. Since Nord costs something like $10-15bn, and Russia is now unexpectedly cash-strapped, perhaps this was the motivation behind the unusually uncompromising confrontation with Ukraine.

Posted by: Andrey Subbotin | Jan 13 2009 8:51 utc | 14

Thanks for the information, Andrey.

I think the point that I was trying to make is how little the Ukraine is a party to a dispute in its own country.

The dispute is between Russia and those (including Europe) who seek to weaken Russia.

Despite our ideals, many nations have limited sovereignity, and must attach themselves to a bloc in order to survive.

As Bob Dylan once sang about Medgar Evers, "I'm only a pawn in this game."

Posted by: Malooga | Jan 13 2009 9:34 utc | 15

Hmm - it ain't over: Gazprom Says Ukraine Blocking Russian Gas Transit (Update1)

- OAO Gazprom Deputy Chief Executive Officer Alexander Medvedev said Ukraine is blocking Russian gas flows to Europe, less than four hours after resuming supplies.

Gazprom has notified the European Commission of Ukraine’s actions and may declare force majeure, Medvedev said in a conference call with reporters today. NAK Naftogaz Ukrainy said in a statement the two companies had not agreed in time on volumes of gas flows, potentially endangering equipment.

The resumption of flows was designed to be the first step toward ending a six-day supply halt that disrupted shipments to at least 20 European nations. Gazprom, the Russian supplier of a quarter of Europe’s natural gas, attempted to resume deliveries after observers from the European Union began monitoring transit at metering stations in Russia and Ukraine under an accord signed yesterday.

“The door is closed as before,” Medvedev said. “We did not close the door. We are doing our utmost to resume flows to our customers. Unfortunately we can’t transit gas physically through Ukraine.”
“The EU monitors are in place but Russia and Ukraine have yet to agree on how compressor stations powering the Ukrainian pipeline network will be fueled,” Maria Radina, an oil and gas analyst with UBS AG, said by telephone from Moscow today. “This will likely be the next issue in Russia and Ukraine negotiations.”

The Russian point: The "technical gas" used to drive the compressor stations (one every 50 miles or so) is payed for with the transit fee Ukraine gets.
The Ukraine point: No its not.

Posted by: b | Jan 13 2009 11:49 utc | 16

Malooga wrote: The mysterious rise and crash in the price of oil demonstrates that the US is still the marketmaker. That is to say, the US still controls the two lifebloods of civilization: oil and money, and the two are integrally related.

As Malooga implies, it is well nigh impossible to dope out the mechanisms. Yes, it controls money, I agree, that seems a reasonable statement. About oil, its price, I think not. Remember that all (practically all?) commodities boomed at once, and then all sank...There is (was) a huge chunk of money sloshing and slushing around with no place to go and what happened is that another bubble arose, with traders riding it on the up slope (and no doubt down as well, etc.) Petrol traders went banoonies as my Brit friend says. They made out like bandits! according to them (40% of them live on my doorstep.)

Peak oilers like to lay stress on ‘demand destruction’ to explain the lower prices, but in fact, imho, until just very recently (building, manufacturing, trade, thus transport, etc.) not much of that took place though one can always find stats. that look impressive. It was a speculative bubble, a reaction to the expiration of the other bubbles, imho, worldwide, and not ‘controlled’ by anyone. As for the other aspects of the ‘oil industry’ the US’ problem is precisely that it controls nothing much. It doesn’t control the investments bigoil can or will make, and has no grip on Nationalized fossil fuels (Russia, Venez, Iran, etc.) outside of some ME countries. Therefore it’s frustration, aggression, war-mongering, etc.

My impression. Who knows!

thx for the update Andrey

Posted by: Tangerine | Jan 13 2009 13:40 utc | 17


This is a quick sketch, not a developed case, which I don't have time for at the moment.

If it was the mother of all speculative bubbles, built on all previous, and they made out like bandits, meaning that there is an even bigger ball of capital looking for a home, where did all the money go? It just vanished into thin air.

I am not doubting that speculation was going on and that some, possibly many, did not profit handsomely.

But the bubble itself made no sense whatsoever: the underlying fundamentals were all wrong; only the propaganda was right.

It formed after it was clear that the world economy was tanking, indeed on the verge of collapse. It formed with all indicators going down. It formed while worldwide reserves were full. It formed, and THEN Bush announced the US was going to buy MORE oil for its reserves while oil was at market peak. The people who make these decisions are not that stupid.

It formed when the US desperately needed Iran's help in pacifying Iraq. It formed, and Russia and Venezuela started spending money like water, investing in projects which only make sense while oil remains over $60/bl. (Along with China, our current "axis of evil" -- as oppossed to our democratic oil-producing friends like Kuwait, Saudi Arabia, and the gulf sheikdoms who are busy building air-conditioned sand beaches and islands shaped like palm-trees for Hollywood's brainless glitterati with their filthy lucre -- I kid you not!)

It formed, and NPR -- the biggest source of disinformation I know -- kept running story after story, expert after expert, "catapulting the propaganda," as they say, about how China was responsible, allowing China to be falsely demonized throughout the Olympics (Not to mention the eternal Tibetan shenanigans). (In any event, since the West buys the vast majority of Chinese production, and since they used the off-shoring of that production to lower their own CO2 emissions and increase their corporate profits, why is China responsible for anything?)

It formed, and suddenly very supicious, faux progressive, astroturf, "peak oil" groups began forming around the country. Posed as "leftist progressives," these people, many of whom could barely quote Kunstler, much less think up a program of action, were advocating a straight right-wing agenda: Curtail lower middle class living standards, no vacations, no heat, bigger oil tax on the poor, etc. But no talk of the wealthy being taxed more; of air travel or second homes or fifth cars; of a highly progressive tax on oil which would only kick in after people's basic needs to survive and commute to their job were met; no talk of the poor whatsoever. (I attended one meeting of the group in my town of 20,000 -- they sure didn't like what I had to say about the poor!)

And curiously, the past Christmas (one year ago), I was intrigued when a local interfaith group, which holds "progressive" events hosted a local speaker at the most influential church in the area: a non-Unitarian, Unitarian Church member here in Connecticut, who just "happened" to work for the CFR in DC! (not making this up), and waddaya know: the same talking points! What a coinkydink! (By the way, they are Obama's talking points before he even said them. "We are just all going to have to sacrifice -- not the ultra-wealthy who are showered with free money beyond historical precedent.)

We know that the government announced the desire to "stabilize," that is to say, control, markets after 9-11. And we know that every government would like that ability.

The fact that the US does not own the majority of production is irrelevant. Does the poor coffee or cocoa or cotton or orange juice producing nation control the price of their commodity? Of course not! It is controlled, outside of natural forces, at the other end, by the consumers, and even more so by the financiers.

Why are impoverished countries, not only encouraged, but suborned by debt and bribe, to destroy their societies in order to continually invest in more and more export-oriented production, even when the market is at surfeit? Simple, control.

I watched as the oil market stayed suspiciously low throughout the early nineties, below $20/bl., every company simply hemorraging money (while I was working in the industry), until, and just until the big players bought up enough of the small ones to control the market, and then the price of oil, and more importantly corporate profits, took off to levels never seen before in the history of the planet. Look at fat-assed Lee Raymond -- does he look like that sharp a businessman to you? Sharper than Bill Gates?

(By the way, oil technology, which is far simpler and older than the internal combustion engine, is considered proprietary technology and workers are required to sign non-disclosure agreements. Doesn't anyone think it strange that Saudi Arabia, which has had oil money dripping out of their fat corrupt ruler's ears for an entire lifetime, never thought to invest in aquiring the technology controlled only by US, Russia, and to some extent, France and UK/Dutch? Doesn't anyone think it strange that the West and Russia have completely different theories about where oil comes from?)

We know that if the planet really does need more energy -- as every energy producer and astroturf green group tels us -- that it is essential that oil reamin steady above $60/bl. for the proper long-term investments to be made. And we know in what countries those investments need to be made in, and what our success has been in controlling those countries.

We are continually told that there has been much production damage recently, in Nigeria, in the Gulf of Mexico, Kunstler never stops reminding us that Saudi Arabia is past peak, and of course, in Iraq, where we knocked whole percentage points off of world production.

If all of this is so, then why is oil now almost artificially low? How long will it stay that way? Until there is an (unforeseen) energy crisis or until we topple the leadership in those countries that we don't like -- that is, those that attempt a semblance of an independent foreign policy?

I worked with oil for five years. I love oil. I thought I understood oil, just like I once thought I understood the world. After Clinton's impeachment, the stolen 2000 election including the unbelievable Supreme Court decision, 9-11, 7-7, the housing "crisis," the oil bubble, and the financial "crisis," I realized that the world was not as I was told it was.

Oil is a commodity which all too often seems to behave opposite to how we are taught commodities should. So very, very strange.

Posted by: Malooga | Jan 13 2009 17:06 utc | 18

Thank-you Taras for that insightful post. I know much more is going on in this dispute then gas. My own personal feeling is that Ukraine is bankrupt. The economy is in tatters, and they have exhausted the IMF loan. They simply do no have the funds to pay the debts nor are they in a position to pay market prices for gas. I also do not believe they have the reserves they claim. In desperation, they are siphoning. The EU may provide them with a loan in the short term but what about the long term ? Back to the IMF ? The IMF when they lend you money forces you to adopt their economic policies which can be disastrous. Ask Argentina about that.

As to the larger picture and Russia's relations with the west we shall have to wait and see. Now with the buffoon Bush out of office, I expect calmer relations with Obama. Germany, has a tremendous amout of economic ties with Russia and cannot afford to see it collapse economically. Italy and Austria are Russia's best friends. Let us see how things play out.

Where is the poetry from ?

Posted by: Cyric Renner | Jan 13 2009 18:25 utc | 19

Germany, has a tremendous amout of economic ties with Russia and cannot afford to see it collapse economically.

That is exactly why they would be happy to see it collapse economically. Just as when Eastern Europe collapsed, and Yugoslavia, it represents a tremendous opportunity to pick up ailing assets for pennies on the dollar, extending economic hegemony over the region. Remember that throughout the entire Soviet collapse, throughout mountains of human pain and suffering, shipments of gas and strategic minerals to Western Europe never faltered.

By the way, the post was from me, Malooga.

Taras Shevchenko is the national poet of the Ukraine. I find his work very moving.

Posted by: Malooga | Jan 13 2009 18:53 utc | 20

Russian energy giant Gazprom has hinted that the United States might have persuaded Ukraine to block Russian gas supplies to Europe.

"One gets the impression that this whole musical which is happening in Ukraine is being conducted by a completely different country," Gazprom deputy chief executive Alexander Medvedev said on Tuesday.

Posted by: Malooga | Jan 14 2009 0:07 utc | 21

I am unable to understand this post. But well some points are useful for me.

Posted by: brogueboubore | Jan 20 2009 22:18 utc | 22

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