Gazprom is setting the stage for the February showdown
Today's Financial News - Posted December 15, 2008
Today’s moves by Russia’s natural gas monopoly Gazprom (OGZPY) indicate that all pieces are moving into position for the February energy crisis…
by J. Christoph Amberger
Baltimore — (TFN): The scenario we outlined in our special report last month is unfolding with the accuracy of a Swiss watch. You remember, we predicted that Russia—hit hard by plummeting oil revenues—will be forced to make a power play early next year… to insure that its natural gas monopoly Gazprom will be able to bankroll Russian government spending.
For one, Gazprom (OTC:OGZPY) is busy creating a “business-as-usual” precedent: The company reportedly is considering raising the gas price for Belarus from $128.9 to $240 per 1000 cubic meters to offset an expected decline in oil revenues.
Belarus had expected to buy natural gas at no more than $160 per 1000 cubic meters in 2009, and walk out with a deal for $140.
(A five-year contract with Gazprom signed On December 31, 2006, raised the price for Belarus to $100 per 1000 cubic meters for 2007 compared with $46.68 in the previous two and a half years. The price was to gradually increase to the European market level by 2011. The new price for Belarus will be equal to the price for gas delivery’s to Poland ($430), minus import duty and delivery costs.
At the same time, news reports today warned that Hungary’s Russian gas imports may come to a halt in January unless Russia and Ukraine resolve their billing dispute. (Hungary derives about 80% of its natural gas imports from Russia via Ukraine.)
Gazprom’s Sergej Kupriyanov said: ”Hungary could remain without gas unless Russia manages to resolve its dispute with Ukraine.”
This is a veiled threat toward Germany and the European Union as well: Their gas… just like Hungary’s… has to pass through Ukraine.
Both Ukraine and Belarus are at the verge of bankruptcy. Kiev is unable to meet its obligations as is, let alone pay double the amount charged so far.
Pro-Russian Belarus is in a slightly better position: It will be used as an example of how gracious and generous Russia treats its customers. Expect Gazprom to provide Minsk with a sizable discount… slamming pro-Western Ukraine with the new price by December 25.
This will set the stage for the final phase of this confrontation, which will take place within two weeks of Obama’s inauguration.
(I’ve said it all before… make sure you read up on it!)
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