Russia Cuts Off Ukraine’s Gas

In case you missed this, the war of words between the Ukraine and Russial over the formers gas supply from the latter culminated in Russian cutting off the Ukraine today.

The ostensibly centers around a pricing dispute between the two although political tensions have been high for years and certainly played a part. The gas pipeline that supplys the Ukraine also delivers gas to Western Europe and traverses the Ukraine. The Ukraine has said that they will not divert or in any other way impede the flow of gas meant for Europe. Nevertheless, there is some concern as disputes between the two has affected the gas supply in the past.

Despite acting like an 800 pound gorilla, the reality is that the Russian oil behemoth is reeling. Gzprom, the natural gas monopoly is struggling to survive under a crippling debt load and may yet end up as another asset in Putin’s portfolio. Western investors will, as usual, be the ones that take it in the chops. The decline in the price of oil has savaged the Russian economy and laid bare the fallacies underpinning past promotion of its potential.

The Ukranian situation will likely be negotiated and resolved. The larger problems Russia faces are not so easy to control. One hopes for better results than normally seen from Russia when faced with crisis. It may well be a vain hope.

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