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Gazprom Is Unlikely to Yield on Ukraine

Published: November 14, 2012 (Issue # 1735)



  • Several EU nations have procured discounts but Ukraine lacks political leverage.
    Photo: MAXIM STULOV / VEDOMOSTI

MOSCOW Gazprom may have agreed tocut prices formany ofits European customers, but thechances ofits biggest foreign market, Ukraine, getting adiscount appear slim, according toan analyst report.

Perhaps Gazprom cannot afford yet another price cut when its revenues andnet profits are under such strain, Andrew Neff, aRussia analyst forIHS Energy, said last week.

Inthe latest concession, Gazprom agreed last week toshave 10 percent off theprice that it charges Polish gas importer, PGNiG. Germany andItaly had won similar discounts inpast months onthe backdrop ofincreased scrutiny bythe European Commission ofGazproms business inEurope.

Not amember ofthe EU, Ukraine doesnt enjoy thepolitical backing ofthe bloc, andit doesnt have analternative source forits huge gas imports, Neff said inthe research note.

Ukraines current political leaders bear part ofthe blame forthe price impasse with Russia, thenote said.

Ukrainian policymakers also can point thefinger squarely inthe mirror fortheir current predicament, Neff wrote.

After President Viktor Yanukovich came topower inUkraine, thecountry made amajor strategic error when it didnt tear up thecurrent contract with Gazprom containing what Neff called aninflated base price, thenote said. Instead, Yanukovich secured adiscount forUkraines national energy company Naftogaz inexchange forextending theRussian lease ofthe Sevastopol naval base.

Not only has Russia argued since that time that Gazprom already has granted Naftogaz aprice discount but that accord set expectations onthe Russian side that any concessions byGazprom would be matched byconcessions byNaftogaz and/or theUkrainian government as well, Neff wrote.

Thus, Russia has dangled thepossibility oflower gas prices forUkraine if it joins aRussia-led customs union anoffer that Ukraine has resisted so far.

Gazproms European customers have wrangled lower prices andretroactive discounts fromthe Russian export monopoly bythreatening or, inPGNiGs case, actually launching arbitration proceedings. But Ukraine didnt cross that line, Neff noted.

Ukrainian President Yanukovich avoids araucous legal standoff because his voter base is loyal toRussia, said Volodymyr Fesenko, director ofthe Penta political studies center inKiev. TheUkrainian government is also afraid oflosing that battle, he added.

Kiev damaged its odds ofgaining theupper hand inthe price dispute byalienating theEuropean Union political establishment, which criticized theprosecution andimprisonment ofUkraines former prime minister Yulia Tymoshenko as politically motivated, Fesenko said.

Ukraine has chosen thepath ofincreasing its own production ofgas aneffort that will not bear fruit any time soon, he said. Even so, significant progress onthis could over time compel Gazprom toreconsider its adamant approach todealing with Ukraine, Fesenko said.





 


ALL ABOUT TOWN

Thursday, Oct. 2


The celebration of the bicentennial of the birth of Mikhail Lermontov continues with todays free exhibition in the citys Lermontov Library at 19 Liteiny Prospekt. Titled Under the Rustling Wings, the temporary exhibition will feature the costumes and scenery used in the 1917 production of Lermontovs play The Masquerade, which he wrote in 1835 when he was only 21 years old.



Friday, Oct. 3


Learn more about how to manage and evaluate employee performance during SPIBAs Human Resources Committee meeting this morning on Employee Assessment: Global and Local Trends. Starting at 9:30 a.m., the discussion will touch on such topics as the partnership between HR and business, reliable assessment strategies and more, with Tatiana Andrianova, the head of the SHL Russia and CIS branch in St. Petersburg, as the featured guest. Confirm your participation by Oct. 2 by emailing office@spiba.ru or calling 325 9091.


AmChams Procurement Committee Meeting is at 9 a.m. this morning in their office in the New St. Isaac Office Center on Ulitsa Yakubovicha.



Saturday, Oct. 4


Wine and cheese lovers will get their chance to revel during Scandinavia Country Club and Spas Wine Market Weekend. Going on today and tomorrow, wining diners can listen to live music, take part in culinary classes and, of course, sample a variety of fine wines from around the world. The cost of admission is 400 rubles ($10.30) for adults and 200 rubles ($5.15) for children.



Sunday, Oct. 5


Look for the latest fall fashions at the Autumn Market today in Freedom Anticafe at 7 Kazanskaya Ulitsa. The minimarket plans to offer clothes more flattering than the puffy jackets that are a staple of the citys cold-weather fashion, while offering the same amount of protection from the biting winds blowing off of the Baltic.



Monday, Oct. 6


SKA St. Petersburg, the citys KHL affiliate, welcomes Slovakian club HC Slovan in a match-up tonight at the Ice Palace near the Prospekt Bolshevikov metro station. The puck drops at 7:30 p.m. and tickets can be purchased on the clubs website or in person at either the arenas box office or the clubs merchandise store on Nevsky Prospekt.



Tuesday, Oct. 7


Learn more about Russias energy industry at the St. Petersburg Energy Forum that begins today and runs through Oct. 10. Attracting industry experts and political and business representatives, the forum plans to welcome more than 350 plus companies and their representatives to discuss the future of Russias largest economic sector.



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