Putin squeezes Ukraine on natural gas, demands payment in advance

posted at 10:01 am on May 15, 2014 by Ed Morrissey

Vladimir Putin has become more standoffish as of late regarding the so-called “pro-Russian separatists” in eastern Ukraine, but he’s not getting soft in the face of sanctions, either. Earlier today, Putin cut off Ukraine’s credit with Gazprom, insisting that any future purchases of natural gas would require cash up front:

Russia will only deliver gas to Ukraine only if it pays in advance starting from next month, President Vladimir Putin said in a letter released Thursday, raising the pressure on the struggling neighbor.

Putin first warned in April that Russia would do so, in a letter to European leaders whose nations are customers of Russian state-controlled Gazprom natural gas giant. He said Moscow would have to demand advance payment if Ukraine failed to start settling its mounting gas debt.

In the second letter released by the Kremlin Thursday, Putin said that a meeting involving Russian, Ukrainian and the European Union officials has failed to settle the issue. Putin said that Ukraine’s gas debt to Russia has kept rising and has reached $3.5 billion.

“Given the circumstances, the Russian company has issued an advance invoice for gas deliveries to Ukraine, which is completely in accordance with the contract, and after June 1 gas deliveries will be limited to the amount prepaid by the Ukrainian company,” Putin said in the letter.

This is the main economic hold that Russia has on Ukraine, but it won’t last for long. The EU and the US may end up paying the bill on behalf of Ukraine in the form of short-term loans, and further economic aid could allow Ukraine to pay up front for its resources. In the long run, this move will incentivize the EU to start producing more of its own natural gas resources to wean itself off of dependency on Russia, and that’s not going to make Gazprom stronger. The question will be whether Ukraine can hold out long enough to make the transition, because it will take years for the EU and the US to get into position to replace Gazprom’s supply.

The EU responded with an economic message of its own:

Lending to Russia by the European Bank for Reconstruction and Development could drop as the economy slows, the bank’s head said on Thursday, while it may step up loans to countries at risk of economic damage from the Russia-Ukraine crisis.

EBRD funding in Russia slumped last year to 1.8 billion euros ($2.5 billion) from 2.6 billion in 2012 due to what the development bank termed “difficult investment conditions”.

Its president, Suma Chakrabarti, said it could now drop again this year.

“It could impact on our business volumes in a country the size of Russia if the economy keeps slowing because investment then slows,” Chakrabarti told reporters at the bank’s annual meeting in Warsaw. …

“That may play out in the EBRD, it hasn’t yet,” he said. “The shareholders bought into my argument that the EBRD has been a force for good in Russia. We will see what the future holds, but not yet.”

EBRD said it had no plans to stop lending altogether, but the implications are clear enough. If Ukraine needs credit because of Russian demands on natural gas, it may come from EBRD, and that’s going to have some impact on its other lending. Chakrabarti is clearly leaving that as an open option while squeezing Putin of vital Western funds to keep his economy from tipping over into recession.

Other than that, AFP reports, Putin’s vision for a “New Russia” is taking shape as he foresaw. A month ago, Putin mentioned this vision in a live television show, and the separatists in Ukraine heard him loud and clear:

While denying Russian troops were in the restive regions, Putin recalled that after its conquest in tsarist times the territory from Donetsk to Odessa was known as Novorossiya — New Russia.

Won by Russia in famous battles led by Catherine the Great and her favourite Grigory Potemkin, eastern and southern Ukraine only ended up as part of the country after the territory was transferred by the Bolsheviks in the 1920s, Putin said.

“Why they did this, God only knows,” he lamented.

After the weekend votes in the east, the rebels moved quickly to stake their claim to joining Russia, with Donetsk separatist chief Denis Pushilin declaring they were seeking to “restore historic justice” — echoing a term Putin used to describe Russia’s annexation of Crimea in March. …

The “New Russia” idea has taken hold in the regions however, with the self-styled governor of Donetsk, Pavlo Gubarev, using the term this week.

He told the Russia-24 news channel the newly declared “People’s Republic of Donetsk” was “only the first step towards the great New Russia in the ‘ex-east of Ukraine’.”

That parallels the historical justification as Putin used for Crimea. The argument in March was that the transfer of Crimea was a bureaucratic bungle during the Nikita Khrushchev era. Putin is simply setting the argument back about 30 years. The signal to separatists in the Novorossiya region could hardly have been clearer.

Putin is continuing to proceed along the ethnicity-determines-sovereignty track. The Baltic states had better be prepared for what’s coming after Putin finishes up his conquest in Ukraine, and that may be sooner than one would imagine. NATO pointed out yesterday that Russian troops haven’t budged from the Ukraine border, despite Putin’s claims:


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The chicken and the reset button have been abused beyond belief, poor things.

Bishop on May 15, 2014 at 10:04 AM

We have natural gas. Too bad we have 0. Flexibility?

Bmore on May 15, 2014 at 10:04 AM

Yeah the US is going to pay bill. And the crazy never stops.

coolrepublica on May 15, 2014 at 10:05 AM

1 part expansionism
1 part finger in Obama’s eye.

Murphy9 on May 15, 2014 at 10:08 AM

This little communist tyrant thinks he is tough. He still has dreams of the old empire.
We all know what happens to tyrants in the end. He will get his eventually.

weedisgood on May 15, 2014 at 10:12 AM

This is the main economic hold that Russia has on Ukraine, but it won’t last for long. The EU and the US may end up paying the bill on behalf of Ukraine in the form of short-term loans, and further economic aid could allow Ukraine to pay up front for its resources. In the long run, this move will incentivize the EU to start producing more of its own natural gas resources to wean itself off of dependency on Russia, and that’s not going to make Gazprom stronger. The question will be whether Ukraine can hold out long enough to make the transition, because it will take years for the EU and the US to get into position to replace Gazprom’s supply.


In all seriousness, Ed …

… do you even go back and read what you have written?

Let’s extract from this one paragraph:

This is the main economic hold that Russia has on Ukraine, but it won’t last for long. *snip* The question will be whether Ukraine can hold out long enough to make the transition, because it will take years for the EU and the US to get into position to replace Gazprom’s supply.

.
You answered the “because it will take years” part further in your article:

The Baltic states had better be prepared for what’s coming after Putin finishes up his conquest in Ukraine, and that may be sooner than one would imagine.

.
Which could have been summed up more concisely: NO.

PolAgnostic on May 15, 2014 at 10:12 AM

This little communist tyrant thinks he is tough. He still has dreams of the old empire.
We all know what happens to tyrants in the end. He will get his eventually.

weedisgood on May 15, 2014 at 10:12 AM


Despots and tyrants around the world LOVE foolish people like you.

Because they know the only country that has successfully fought to overthrow them in the last 73 years has abdicated that responsibility.

PolAgnostic on May 15, 2014 at 10:15 AM

The only button worthy of mashing is the big red clown nose between The One’s lying eyes.

vnvet on May 15, 2014 at 10:16 AM

Because they know the only country that has successfully fought to overthrow them in the last 73 years has abdicated that responsibility.

PolAgnostic on May 15, 2014 at 10:15 AM

No history shows people usually get fed up with their oppressive rulers and usually cause an uprising. It’s inevitable. You can only keep someone down for so long. The communist fool even looks weaker doing this.

weedisgood on May 15, 2014 at 10:20 AM

Putin, the Thug, and his cronies appear to be winning as Europe sits on its ass. I blame the Europeans far more than I blame Obama for this situation.

SC.Charlie on May 15, 2014 at 10:20 AM

I’m not use to seeing the U.S. played at every turn. And I don’t like it.

Cindy Munford on May 15, 2014 at 10:21 AM

No history shows people usually get fed up with their oppressive rulers and usually cause an uprising. It’s inevitable. You can only keep someone down for so long. The communist fool even looks weaker doing this.

weedisgood on May 15, 2014 at 10:20 AM

Yeah, that must explain why Putin’s approval ratings are sky high in his own country.

vlad martel on May 15, 2014 at 10:24 AM

Pootin gives me gas…

vnvet on May 15, 2014 at 10:24 AM

Yeah the US is going to pay bill. And the crazy never stops.

coolrepublica on May 15, 2014 at 10:05 AM

You know what’s REALLY crazy? We could have been in a position to ship Ukraine all the gas they needed (and help our economy too!), except some damn fool President and his brain-dead lemming supporters said “NO”. The regressive party of “NO” strikes again and again and again…

dominigan on May 15, 2014 at 10:25 AM

While denying Russian troops were in the restive regions, Putin recalled that after its conquest in tsarist times the territory from Donetsk to Odessa was known as Novorossiya — New Russia.

Killary presented a recharge button to Russia.

Putin is providing the “Under New Management” signs to Novorossiya. In large part because he knows he can get away with it since the United States is cowardly, weak and feckless under the current administration.

Happy Nomad on May 15, 2014 at 10:28 AM

“The EU and the US may end up paying the bill on behalf of Ukraine in the form of short-term loans”, which will never be paid back. Meanwhile US tax dollars, or more precisely, freshly printed dollars, will will flow eventually to Russia.

Meanwhile, “Russia indeed dumped a record $26 billion, or some 20% of all of its (US Treasury) holdings, bringing its post-March total to just over $100 billion – the lowest since the Lehman crisis.”

http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/05/Russia%20TSY%20March_0.jpg

Interestingly, some mysterious entity in Belgium is buying the US Treasuries as fast as Russia can sell them and now owns an amount equal to one half the GDP of Belgium.

http://www.zerohedge.com/news/2014-05-15/russia-dumps-20-its-treasury-holdings-mystery-belgium-buyer-adds-another-whopping-40

Viator on May 15, 2014 at 10:31 AM

Putin doesn’t need Europe to buy Russian gas anymore. Next week he will be signing an agreement with China to complete a pipeline. He will then force Europe to beg to buy Russian gas or freeze.

Unless… Global Warming saves them! How ironic. :-)

NiteOwl on May 15, 2014 at 10:34 AM

I hope the Ukrainian people remember which American president caused all their coming misery – especially if it goes on into next Winter. In fact, I hope the American people remember what foreign policy genius they have in the Oval Office – especially as the shear misery of his genius goes into effect next Winter.

What a foreign policy genius we have in the Oval Office. Some folks are just lucky, I guess.

dockywocky on May 15, 2014 at 10:36 AM

But, how will this affect Hunter’s job?

Fallon on May 15, 2014 at 10:38 AM

You know what’s REALLY crazy? We could have been in a position to ship Ukraine all the gas they needed (and help our economy too!), except some damn fool President and his brain-dead lemming supporters said “NO”.

dominigan on May 15, 2014 at 10:25 AM

Help our economy how? In case you failed to figure it, Ukraine has no money. Its only resource is its territory and its pretty blonde women, most of whom are already working night shifts all around the world.

Rix on May 15, 2014 at 10:41 AM

If Putin thought that ethnicity determined sovereignty, he would’ve stopped at Crimea. Now he’s taking over Russian-speaking areas; they’ve still majority non-Russian ethnically.

calbear on May 15, 2014 at 10:42 AM

Bah… And this is important how? Don’t we have far more important things to worry about then Russia requiring her customers to, you know, actually pay their bills?

oscarwilde on May 15, 2014 at 10:44 AM

This little communist tyrant thinks he is tough. He still has dreams of the old empire.
We all know what happens to tyrants in the end. He will get his eventually.

weedisgood on May 15, 2014 at 10:12 AM

Who will give the little Communist tyrant what he deserves? Obama is too busy smokin’ good weed to get tough with Putin. Push the reset button and get flexible, like a wet noodle!

Providing Ukraine with funds to buy gas might work in the short term, but we probably should be providing military hardware to Ukraine to help it defend itself. We should also be developing Europe’s natural gas infrastructure, and our own infrastructure to export LNG during the precious summer months, when Ukraine could get by with less natural gas.

Steve Z on May 15, 2014 at 10:45 AM

Yeah, that must explain why Putin’s approval ratings are sky high in his own country.

vlad martel on May 15, 2014 at 10:24 AM

A communist leader with a “sky high” approval?
Kim Jong-un of North Korea got elected with over 99% of the vote.
I take communist leaders and their “approval” rating as propaganda and so should you.

weedisgood on May 15, 2014 at 10:47 AM

Aren’t Putin’s “15 minutes” just about up?
The country is a failure and these Putin-created distractions solve none of Russia’s problems.

albill on May 15, 2014 at 10:49 AM

No history shows people usually get fed up with their oppressive rulers and usually cause an uprising. It’s inevitable. You can only keep someone down for so long. The communist fool even looks weaker doing this.

weedisgood on May 15, 2014 at 10:20 AM

.
You’re the Ravenous Bug Blatter Beast of Traal, aren’t you?

How long did feudalism as a form of government last?

How long did the Pharoahs rule Egypt?

These are the EASY questions.

The number of successful uprisings that resulted in the formation of stable, democratic governments which did not disappear in a historical “blink of the eye” can be counted on the fingers of ONE hand.

PolAgnostic on May 15, 2014 at 10:49 AM

Isn’t Russia just 50 years from being Islamized?

Oil Can on May 15, 2014 at 10:56 AM

I’m not use to seeing the U.S. played at every turn. And I don’t like it. – Cindy Munford on May 15, 2014 at 10:21 AM

In my humble opinion, we are being played by the socialist Europeans and the Russians. And, remember, the French will honor a contract to build two warships for the Russians that they can use in the Black Sea to defend their new territory, Crimea.

SC.Charlie on May 15, 2014 at 10:57 AM

A communist leader with a “sky high” approval?
Kim Jong-un of North Korea got elected with over 99% of the vote.
I take communist leaders and their “approval” rating as propaganda and so should you.

Jesus. Never saw that response coming….

vlad martel on May 15, 2014 at 10:58 AM

Isn’t Russia just 50 years from being Islamized? – Oil Can on May 15, 2014 at 10:56 AM

You have Russia confused with socialist Europe, my friend.

SC.Charlie on May 15, 2014 at 10:59 AM

Isn’t Russia just 50 years from being Islamized?

Oil Can on May 15, 2014 at 10:56 AM

No, and in the eyes of the US, this is probably the problem….

vlad martel on May 15, 2014 at 10:59 AM

NATO is toothless. Vlad knows it. NATO knows it. The world knows it.
Prepare for more humiliation. I see China just moved a deep sea oil drilling rig, with 80 ship escort, into contested waters off Japan right after Obama went over to assure them we would help protect them against Chinese aggression.

butch on May 15, 2014 at 11:11 AM

NATO is toothless. Vlad knows it. NATO knows it. The world knows it.
Prepare for more humiliation. I see China just moved a deep sea oil drilling rig, with 80 ship escort, into contested waters off Japan Viet Nam right after Obama went over to assure them we would help protect them against Chinese aggression.

butch on May 15, 2014 at 11:11 AM

.
FIFY

PolAgnostic on May 15, 2014 at 11:27 AM

No history shows people usually get fed up with their oppressive rulers and usually cause an uprising. It’s inevitable. You can only keep someone down for so long. The communist fool even looks weaker doing this.

weedisgood on May 15, 2014 at 10:20 AM

1. As numerous others have pointed out, uprisings are hardly inevitable. In fact, a corollary to your notion is that the more oppressive the regime, the shorter they last. History does not bear that out.

2. Your thought smacks dangerously of Obama’s “You didn’t build that.” In the America of today, the lights must come on when you flip the switch, but don’t you dare think about placing the plant near me or burning coal to produce the electricity. Likewise, Putin is a meanie and we must stop him, but don’t you dare think about asking us to spend money on the military or risk casualties. No, some mythical oppressed Russians hungry for the joy of homosexual coitus will rise up and overthrow the new czar. We may be the first nation in the history of the world to have its seats of power chaired with unicorns, Care Bears and La La Loopsies.

3. Putin is not a communist. Nothing in his politics suggests that he is anything but a neo-imperialist, more Mussolini nostalgic for a new Rome than Lenin trying to update “What Is to Be Done?” Some people have stated that this is a distinction without a difference, but it is vitally important we understand Putin’s taxonomy. Communists were universalists. Putin may be content up to the Vistula.

dreadnought62 on May 15, 2014 at 11:32 AM

The EU and the US may end up paying the bill on behalf of Ukraine in the form of short-term loans, and further economic aid could allow Ukraine to pay up front for its resources.

That’s one way of funneling money to Hunter Biden and his well-connected friends.

I could ask if it was in America’s best interests, but if that was a consideration Victoria Nuland would not have spent five billion dollars to destabilize Ukraine in the first place.

David Blue on May 15, 2014 at 11:33 AM

The signal to separatists in the Novorossiya region could hardly have been clearer.

No. The main signal to Ukrainians who don’t like the junta is that it hates them and is killing them. It has destroyed their rights and overthrown their democracy. It continues to intimidate, terrorize and sometimes shoot, burn and beat them.

It is dishonest and bizarre to put popular dissatisfaction with the junta down to professional Russian military infiltrators.

It’s just inevitable that some people are not going to like being put under the authority of a foreign-backed tyranny, which they did not choose and which, in violation of a signed compromise agreement, overthrew the legitimate government they did vote for.

David Blue on May 15, 2014 at 11:42 AM

No, and in the eyes of the US, this is probably the problem….

vlad martel on May 15, 2014 at 10:59 AM

“Anti-racists” demand non-white mass immigration and forced assimilation in all white countries. (And only in white countries.)

I guess we’re seeing what happens to the holdouts: destabilization.

David Blue on May 15, 2014 at 11:46 AM

Da, Putin can!

Schadenfreude on May 15, 2014 at 11:51 AM

Providing Ukraine with funds to buy gas might work in the short term, but we probably should be providing military hardware to Ukraine to help it defend itself. We should also be developing Europe’s natural gas infrastructure, and our own infrastructure to export LNG during the precious summer months, when Ukraine could get by with less natural gas.

Steve Z on May 15, 2014 at 10:45 AM

And the money to pay for all this, and further Cold War II policies? Will it just be added to a national debt that America’s rulers are not serious about paying off anyway?

If there’s infinite free money on tap, through taking on debts that will never be paid off, how about doing something exciting, like defending America’s own borders?

On no possible interpretation is Russia invading America, swamping it demographically, and endangering the future of the American nation. But Mexico is.

David Blue on May 15, 2014 at 11:54 AM

dreadnought62 on May 15, 2014 at 11:32 AM

Nice.

vlad martel on May 15, 2014 at 11:58 AM

Big picture people, big picture. Putin is racing against time. Russia is losing people at a alarming rate. The numbers in the various white and unclassified reports are shocking. Even with Ukraine and the Baltic’s the future is looking pretty grim. Short term, this is all Putin can do. Medium term, the slide down increases. Long term, there is no Russia as we in the west know it. That brings up a whole set of new(and not so new)problems to the front. First and foremost, what are we going to do about a state with almost no population(to speak of)that has nuclear weapons. In the not so distant future, we could looking at a North Korea on steroids in Russia. And that is only the beginning.

flackcatcher on May 15, 2014 at 12:21 PM


Yeah the US is going to pay bill. And the crazy never stops.

coolrepublica on May 15, 2014 at 10:05 AM

Sure Glad the children of American Taxpayers are so fat. They can afford to miss a couple o meals.

roflmmfao

donabernathy on May 15, 2014 at 12:46 PM

Long term, there is no Russia as we in the west know it.

flackcatcher on May 15, 2014 at 12:21 PM

I’ve always thought the long-term future of Russia would be everything east of the Urals slipping away from them and either becoming part of China or becoming weak and impotent “‘stans,” with just the Moscow area remaining as a sort of rump state that holds the name “Russia.”

Doomberg on May 15, 2014 at 2:19 PM

Putin squeezes Ukraine on natural gas, demands payment in advance

Slava!

Dr. ZhivBlago on May 15, 2014 at 4:11 PM

The Ukraine junta is starving Crimea of water. And refusing to sell – it’s not a question of the Crimeans not being willing to pay. Which is irrelevant to Hot Air’s Cold War II agenda of course, but it does show the atmosphere of growing mutual animosity.

David Blue on May 15, 2014 at 4:36 PM

The Ukraine junta is starving Crimea of water. And refusing to sell – it’s not a question of the Crimeans not being willing to pay. Which is irrelevant to Hot Air’s Cold War II agenda of course, but it does show the atmosphere of growing mutual animosity.

David Blue on May 15, 2014 at 4:36 PM

So the Black Sea is running low?

slickwillie2001 on May 15, 2014 at 5:07 PM

I’ve always thought the long-term future of Russia would be everything east of the Urals slipping away from them and either becoming part of China or becoming weak and impotent “‘stans,” with just the Moscow area remaining as a sort of rump state that holds the name “Russia.”

Doomberg on May 15, 2014 at 2:19 PM

Yep. The far East of Russia can’t be defended from over a billion Chinese that want those resources.

slickwillie2001 on May 15, 2014 at 5:11 PM

No history shows people usually get fed up with their oppressive rulers and usually cause an uprising. It’s inevitable. You can only keep someone down for so long. The communist fool even looks weaker doing this.
weedisgood on May 15, 2014 at 10:20 AM

A little off topic here, weed. If you want to rail about Barry, catch another thread.

AppraisHer on May 15, 2014 at 5:48 PM