Last Friday, Ukraine halted all imports of Russian natural gas. Kiev is preparing itself for a groundbreaking vote later this month to enter a free trade and association agreement with the EU, marking an historic shift away from its former Soviet master. In that context, the decision to cut ties with Russia’s Gazprom seemed especially significant; halting gas flows has typically been Moscow’s bailiwick, as Ukrainians are keenly aware after the “gas wars” of 2006 and 2009. Ukraine reportedly has enough gas stored underground to last it through the winter (as long as it doesn’t get too cold) without Russian gas. But while geopolitics can explain the shutdown, it’s looking more and more like simple economics may be the real reason. Reuters reports:
Ukraine, which pays around $400 per 1,000 cubic metres of Russian gas, one of the highest prices in Europe, has asked Moscow to ease terms it considers excessive and unaffordable for its debt-strapped economy. It has been steadily reducing its Russian gas intake.[Kommersant Daily] said [Ukraine’s state-owned oil and gas company], which owes Gazprom about $800 million for previously imported gas, did not have the financial resources to continue paying for Russian gas for now.
Russia came calling for unpaid bills late last month, and Ukraine’s move to stop imports might be more about its inability to pay than defiance.Kiev’s agreement with Brussels is due to be signed on November 28, but it’s far from a foregone conclusion. Earlier today, the Ukrainian parliament failed to break a deadlock on a law that would release jailed opposition leader Yulia Tymoshenko—one of the EU’s requirements for the accord. With two weeks left, there’s still time to iron out this wrinkle, but that’s also plenty of time for new problems to pop up.[Ukranian President Viktor Yanukovich photo courtesy of Shutterstock]