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Putin Tells West to Pay Ukraine's Gas Bill

If Ukraine is going to receive the Russian gas it needs to meet demand this winter, the West will have to fork over some cash to cover the bill. At least, that’s the line Putin is touting, part of Moscow’s insistence on European and American guarantees of Kiev’s ability to pay for that gas before Gazprom resumes flows. Reuters reports:

“We think that it is absolutely fair that these risks be shared with us by the European or American partners,” Putin told an informal group of experts on Russia that includes many Western specialists critical of him. “Let them give $1.5 billion, at least for a month,” he said. […]

He urged the European Union and the International Monetary Fund to give Ukraine a bridge loan to settle the gas dispute with Russia before Kiev gets a $3 billion tranche from the IMF in January.

“Help Ukraine, give it a bridge loan for a month,” Putin said, adding that so far he has got a negative response.

It’s been clear that this has been an aim of Putin’s from the start, but to hear it put so explicitly by the man himself will rankle Western policymakers already feeling the stress of Russia’s considerable energy leverage. But it isn’t clear that Europe has many other options than to pay: Ukraine is hardly an economic dynamo, and already owes billions in unpaid gas bills. The continent sources roughly a third of its gas supplies from Russia, and half of those flows transit Ukraine at some point. If Ukraine’s own supplies from Russia don’t resume, it’s likely that Kiev will begin siphoning off this transiting gas, as we saw in similar situations in 2006 and 2009.

Putin knows Kiev isn’t the cash cow here; he understands that the bigger target is the West more broadly, and sees the stand-off with Ukraine as a chance to leech resources from his geopolitical adversaries.

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  • Pete

    Look, someone has to pay the Ukraine’s gas bill, no?

    If it is not the EU or the Ukraine, then it is Russia.

    Either that, or the Ukraine has to do without.

    This ain’t rocket science.

  • Andrew Allison

    Please explain why it is that Russia should not get paid for the gas it delivers to Ukraine. I’m no admirer of Putin, but given the antecedents of this debacle, his position is not unreasonable.

    • John Tyler

      Who ever said they should not get paid?

      • Andrew Allison

        The EU is refusing to guarantee payments which Ukraine has no hope of making ( The tone of post, namely is that it’s somehow immoral of Putin to demand payment, is IMO inappropriate. As the post acknowledges, the only alternative to the EU guaranteeing payment is for Ukraine to freeze.

        • Thirdsyphon

          Whether Russia deserves to get paid for the gas or not (I think it doesn’t), that’s a matter between Russia and Ukraine. The EU’s responsibility in all of this is very simple: to pay Russia for the gas that they receive, and to not pay Russia for the gas that they do not receive.

          Issues with the supply chain are the seller’s row to hoe, not the buyer’s. When I order something from Amazon, I don’t expect them to whine about how I won’t get what I paid for unless I also pay the bill for some other customer of theirs who welshed on them.

          Regarding alternatives to freezing, Ukraine has at least one alternative that’s pretty obvious: simply taking as much gas as they need. Let Putin yell and scream all he likes.

          • Andrew Allison

            Putin is simply saying that Russia insists on being paid for the gas which it delivers. The analogy is your being required to co-sign a car loan for your indigent cousin. Furthermore, not only is Europe almost as dependent on Russian gas as Ukraine, but the contracts are use-or-pay. Best case Europe will pay for any gas that gets diverted by Ukraine, worst case Putin keeps his promise, shuts of the gas and Europe freezes along with Ukraine.

          • Thirdsyphon

            That’s the worst case for Russia too, and Putin knows it. If he shuts off the gas, the EU will shut off the money they’ve been sending Russia to pay for it. Russia’s whole economy depends on getting paid for that gas; and Putin’s political authority depends on the Russian economy staying healthy. If the Euros stop flowing, his books won’t balance and Russia’s finances will get a lot more precarious than they already are.

          • Felix Keverich

            “Russia’s whole economy depends on getting paid for that gas” – that’s precisely why Putin will ensure that Russia gets paid, one way or another. Russia really can’t afford to ship gas for free. And Europe won’t last for more than a few weeks without Russian gas.

          • Thirdsyphon

            Russia can ship more gas through the pipes to make up for whatever Ukraine siphons off, as it has in the past. The gas is worthless to Russia in the ground anyway.

            Putin will have to ensure that Russia gets paid “one way or another”, but the tools at his disposal don’t include the ability to unilaterally shake down the EU to pay Ukraine’s tab (let alone the United States, which was a demand so laughable as to be pathetic).

            What Putin can do is scramble to find a way to supply the EU with the quantities of gas that he’s promised them, so that he can receive the funds that he so desperately needs to stay in power. The EU has the leverage here, not Putin.

          • Felix Keverich

            You seem to have a rather simplistic (and silly) view of Russia, its economy and political system.

            Russia’s natural gas sales to the EU generate some 40 billion in revenue annually. About half of it (20b) flows through Ukraine. If we’re talking about a disruption that lasts, say 3 months, that’s at most 5 billion in lost revenue – hardly critical for the survival of Putin’s regime.))

            On the other hand, the cost of the disruption for EU economies (in terms of lost GDP, taxes, investor confidence) will be far in excess of what it takes to cover Ukraine’s gas bill. Which means EU will probably pay.

          • Thirdsyphon

            Your figures are off. In 2013, Russia exported about $350 Billion worth of energy, mostly to Europe, the proceeds from which supplied more than half of the tax revenues needed for Putin’s increasingly profligate budgets.

            I’d like to see Putin try to convince ordinary Russians to accept a doubling of their taxes. . or, conversely, to persuade his soldiers to accept a 50% pay cut. No, seriously. I’d like to see that. Wouldn’t you?

          • Felix Keverich

            You fool. This 350b figure is mostly oil and petroleum products, which thankfully doesn’t have to traverse Ukraine, so they can’t steal that. Nat gas makes up only a small portion Russia’s energy exports.

          • Thirdsyphon

            “YOU FOOL!”

            I love it. Unfortunately, in spite of your pitch-perfect sense of pop culture, you’re still mostly wrong. Russia’s natural gas sales to the EU, by themselves, account for roughly $75B, and what passes through Ukraine is half of that, or $37.5B.

            That’s not a small sum, but it’s enough to make a difference; and if Putin starts turning off the spigots on Europe’s energy supply, neither you nor I can say with any certainty where that trade war will end. The way Europe’s infrastructure is set up, it has no shortage of eligible sellers. The same is not true for Russia and eligible buyers.

    • Thirdsyphon

      In just the past few months, Putin has annexed Crimea from Ukraine and backed a violent secessionist uprising against the Ukrainian government. For Putin to come to the court of global opinion now, whining about how Ukraine should pay Russia for what it’s taken from them is downright Hitlerian in its offensiveness and absurd inversions of the truth.

      It’s Russia that owes a debt to Ukraine, not the other way around; and as far as I’m concerned, Ukraine has a perfect moral right to take every last cubic meter of Russian gas that it requires.

      • Andrew Allison

        It’s a matter of opinion. Mine is that the EU’s implicit support of the overthrow of a democratically elected government in Ukraine precipitated the unfolding disaster in Ukraine. There was never the slightest possibility that Putin would accept Western-oriented control over Crimea, home of its only warm-water port. It’s the EU, not Russia, that’s owes Ukraine. The only way out is for Ukraine and the EU to acknowledge that Crimea is now part of Russia, and to trade Ukrainian neutrality for Russia’s withdrawal of support for the separatists. None of which has anything to do with the need for somebody to pay for the gas which Ukraine desperately needs.

        • Thirdsyphon

          Yanukovych was overthrown by Ukrainians after Putin bullied him into taking a position (against the EU and pro Putin’s neo-USSR customs union) that was wildly unpopular with the people who elected him. His deposition from power, though unlawful, was an act performed by Ukrainians. The US and EU provided support for those actions only in the fevered delusions of Vladimir Putin, which he offers (per his usual) without a shred of proof.

          Bottom line is that Putin took Ukraine’s land, and Ukraine took Russia’s oil. The EU has no moral responsibility to make Russia whole (an ironic legal phrase, considering what Russia has done to Ukraine), much less the United States.

          In any case, what we’re looking at here is increasingly a question of realpolitik, which is no more subject to opinion than warfare is. Either Putin has the power to shake down the EU or he doesn’t; either Ukraine will choose to take Russia’s gas or it won’t; and if it does, either Putin has the power to effectively compel them to desist or he does not.

      • Felix Keverich

        If Ukraine begins to steal gas, destined for Europe, this will be a European problem, not a Russian problem. Russia has already stated that in this event they won’t pump any extra gas, meaning gas shortages in the EU.

        Ukraine’s “moral right” will leave Europe in the cold.

        • Thirdsyphon

          And the EU has said that it intends to pay only for the gas that it actually receives. If Russia doesn’t want to pump extra gas, then Putin will simply have to make do with less money.

          • Felix Keverich

            I’m afraid, that’s not the way it works. You want to see “democracy” in Ukraine, you’ll have to pay for it, buddy.

          • Thirdsyphon

            I’m afraid the way it works is however the people with power (money for the EU, gas for Russia, physical control of the pipelines for Ukraine) decide that it does. Putin’s just a player in this game, not the referee.

  • Fat_Man

    Now that he has named his price, canny negotiators would come up with a list of their demands, such as pulling out of the Donetsk basin. Did I say canny negotiators? Sorry, what was I thinking of. Western leadership from Obama on down is composed of mooncalves and fops. Not a chance there.

    • Thirdsyphon

      Canny negotiators would smell the desperation in Putin’s request for short-term money and take pitiless advantage of it, IMF style. That may yet be what happens.

  • Jacksonian_Libertarian

    My guess is that Ukrainians haven’t been dependent on gas heating until very recently, and that most Ukrainians can remember winters when you just had to dress warmly or freeze. I think they are plenty tough enough to deal with the cold, the protesters after all spent last winter camped in town squares. So this really doesn’t seem like the threat it is being given in the West or in America which has seen central heating and air-conditioning for most of living memory.

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