petroleum economics

Lada Ray reports that Russia will stop transporting gas to Europe via Ukraine and redirect it through Turkey. She also describes Ukraine activities leading up to renewed war on East Ukraine, with the US, France and Poland having agreed to supply advanced arms to Ukraine. In addition, two ships, one from Australia and one from Canada docked in the Odessa port in the past week to two. Each was full of winter uniforms for the Ukraine army. The following article is from Lada Ray's English language blog at https://futuristrendcast.wordpress.com/2015/01/15/confirmed-russia-to-stop-transit-of-gas-to-europe-through-ukraine/

This is a bombshell that was dropped by Russia earlier today.

It has been officially confirmed! The head of Gazprom Alexei Miller announced that Russia would discontinue the Ukrainian route for Russian gas transit to the EU. I expected this announcement ever since I broke the news of the Turkey/Russia deal on 12/2/14, but I did expect it in a year or two: read here and here. Looks like the time is getting compressed and the pressure for change is intensifying.

I understand at this time the flow of gas through Ukraine has been restricted to 2/5th of the usual volume. However, it appears it will soon be stopped completely.

Russia to switch fully to the Turkish Stream to move the quantities necessary to satisfy all of European demand. Ukraine up till now was responsible for about 50% of the Russian gas transit to the EU, with Nord Stream, Belarus and Turkey accounting for the rest.

Ukraine, as always during the heating season, has been stealing Russian gas. This is in addition to massive debt Ukraine has with Russia. Russia is by far Ukraine’s largest creditor; gas debt alone constitutes nearly $5.5 bln. Total Ukraine’s debt to Russia, including corporate is well over $30 bln, according to Vladimir Putin.

This is a much bolder move than anyone expected. EU is in shock. According to Gazrpom’s head Alexei Miller, EU didn’t want South Stream Russia tried to build as partners together with the EU. Therefore, Russia will now deliver gas to Turkey, and then to the border between Turkey and Greece. From thereon, it will be EU’s responsibility to build pipelines through its territory.

Gazrpom is to become a big player in Turkey, and Turkey in return will enjoy massive gas price discounts and large profits from the resale of gas to the EU and other buyers.

Read related articles from 12/2/14: German Vice Chancellor: No Ukraine in NATO; Russia, Let’s Make Up! and from 12/5/14: Declaration of Cold War: What Chain of Events is US Provoking With New Hostile Move? In these I discuss in detail the Putin/Erdogan agreement on building the alternative pipeline to Turkey!

I see several interesting things at play here:

1. My predictions:

First of all, let’s recall that I said from the beginning of 2014 and many times throughout 2014 that when Russia feels even slightly inconvenienced by the West, off to the East they go. My prediction came true spectacularly within only two or three months, when in May 2014 Russia signed a number of mega-deals with China on gas supply, the Power of Siberia gas pipeline construction, high-speed railroad construction, and much more. Then, Putin also signed massive gas supply deal with Turkey to bypass the unfriendly EU, plus, a massive nuclear energy deal. Turkey is, of course, also a part of the East (Middle East).

Second prediction I made was that Europe would start experiencing gas shortages due to Russia’s re-orientation to the East. I said it would happen a few years from now. It appears my predictions’ time table is accelerating!

See the PREDICTIONS page on top navigation bar, as well as my 2014 articles under RUSSIA category for much more on that. Some of the articles are: What Brought Down Russian Satellite? Angela Merkel’s Biggest Fear? Plus Ukraine Election Prediction; Ukraine Part 7: Russia’s Geopolitics, USA’s Bluff and EU’s Big Mistake; Interview with predictions: The Road to Moscow Goes Through Kiev.

2. It seems Miller and Gazprom are very confident that EU has no alternative to the Russian gas at this time. For the longest time EU and Ukraine had been able to blackmail Russia every year, taking advantage of the fact that the EU was Russia’s largest customer and Ukraine – the largest transit artery.

Russia was customarily accused of various transgressions, the blame was yearly shifted to Russia for any gas flow disruptions due to Ukraine’s stealing of Russian gas; the expense for Ukraine’s theft was also placed on Russia’s shoulders alone, while EU denied any responsibility, always siding with Ukraine. It appears Russia/Gazprom feel that enough is enough and that it’s time to cut the Gordian Knot. The fact that Russia now has strategic agreements with Turkey and China helps Russia’s leverage.

3. This is where the economy and geopolitics mix. Russia warned a long time ago that should EU’s behavior not change, there would eventually be more return sanctions. It appears Russia wasn’t kidding!

Recent events, in which Ukraine and certain EU countries acted strangely, to say the least, apparently were the last drop, reinforcing Russia’s intentions. The events I am referring to were: Ukraine PM Yatsenyuk giving multiple interviews and speeches in Germany accusing Russia of attacking the Nazi Germany and Ukraine, while Merkel stood by him, failing to react to the outright lie. The recent Volnovakha, Donbass tragedy in which 10 people died and scores were wounded when a bus with Donetsk pensioners was hit by a bomb or a mine on the Ukraine side. This incident was immediately blamed on the Donbass self-defence. Ukraine tried to get EU to recognize LNR and DNR as terrorist organizations, while designating Russia as the state aiding terrorism, followed by a new round of sanctions. While the resolution failed, another resolution to adopt a new round of anti-Russian sanctions may pass (I don’t have the latest on that). Meanwhile, per reports, US, France and Poland, among others, have agreed to supply advanced arms to Ukraine. In addition, two ships, one from Australia and one from Canada docked in the Odessa port in the past week to two. Each was full of winter uniforms for the Ukraine army. Poroshenko went to Paris to participate in the Unity March together with Merkel and Hollande, as I wrote here, to express solidarity with the victims of the French terrorist acts, while hundreds and thousands were dying at home unnoticed by anyone. Poroshenko’s trip strangely coincided with Yatsenyuk trying to promote Russia as aggressor in Germany and the Volnovakha bus tragedy. Right after returning from France Poroshenko announced three new waves of mobilization to recruit over 200,000 soldiers – we now know that when they re-start the war with Donbass, they’ll be able to kill more efficiently thanks to all those Australian and Canadian uniforms keeping them nice and warm. In the meantime, the bombings of Donbass have intensified by 10-20 times. For the past week or so the number of dead and wounded from Ukraine’s shelling is greater than for the past 3-4 months combined – exact numbers are not known yet, but the preliminary number is 52 dead during the past few days. As a result of Poroshenko’s visit to Paris and the killing of 10 civilians in Volnovakha, the Astana, Kazakhstan peace conference planned for today, January 15, was cancelled. To wrap up the vicious cycle of events, the man who was instrumental in organizing the Astana peace conference was The French president, Hollande. Please refer back to my article: Urgent! Secret Link Between French False Flag Attacks and Ukraine, in which I also said that Hollande was wavering from the party line, trying to play peacemaker, and terror acts in France were meant to remind him to toe the line. Finally, S&P and other Western agencies are set to lower Russia’s rating to junk status: China/Russia to Launch Own Credit Rating Agency to Rival the Big Three.

4. US has been trying to squeeze Russia out of the EU gas market in order to sell to the EU its own, more expensive, shale gas. The shale industry in the US is in difficult circumstances and many fields have been conserved because of low prices and insufficient international demand for the US shale gas. The banks that financed fracking companies are afraid of not getting their money back; many are on the verge of bankruptcy. Obtaining the lucrative EU market is the best thing for the US. Of course the expensive US shale gas will undermine the EU economy, making EU products less competitive, which will help the US economy and keep EU on a short leash for the US purposes. However, building LNG terminals is expensive, they take a lot of valuable space near ports, and it takes time. Such infrastructure isn’t available for the time being. It appears that despite tough talk, EU is ‘stuck’ with cheaper and readily available Russian gas.

5. World Grand-Master Putin at work! Russia’s leverage has increased exponentially from signing strategic mega-deals with China last May and Turkey last December. It appears Putin has decided this was the right time to play one of Russia’s aces; or if you will, to play Russia’s Turkish Gambit!

6. Last fall, when Russia, Ukraine and EU negotiated, EU promised to vouch for Ukraine’s payment for the ongoing supply of Russian gas. In reality, Ukraine never re-paid $3.1 bln in past arrears due before New Year’s. EU also didn’t vouch for Ukraine’s payments past New Year’s. Therefore, any gas Ukraine receives now is unpaid for, which in itself triggers gas supply stoppage.

7. The Ukraine pipeline infrastructure is Soviet built and was never really maintained by Ukraine. It’s either time to fix it, or to abandon it. Perhaps this is the right time to abandon what cannot be fixed – and I am speaking broadly. Ukraine and EU’s behavior have gone far beyond any permissible or even conceivable. The way Ukraine and EU behave towards Russia can be expressed by the following Russian sayings: ‘to spit into a well from which you drink’ and ‘to saw off the branch you are sitting on.’ It appears that with those who don’t understand good will, reason or logic the only way is the way of an ultimatum.