Ukraine's anti-market policies to make matters worse

Ukraine is facing existential challenges, and energy security is one of them. The country is dependent on Russia supplying most of its natural gas as well as uranium fuel for its nuclear reactors. Under these very difficult circumstances, a government with a holistic view of its strategic security and energy goals would logically develop a policy aimed at encouraging increased domestic oil and gas production. Unfortunately, Kyiv is doing the opposite.

Despite the massive Western support it is receiving, Kyiv is promulgating ill-conceived anti-market policies and hare-brained schemes that are set to make matters worse – much worse.

My recent trip to Kyiv to speak at the Adam Smith 6th annual energy conference on energy diversification conference left me disappointed and worried. In recent years, the Western majors, including Shell, BP, Chevron and VITOL, have made commitments to exploration and production in Ukraine. Many have left due to the war with Russia. The more risk-tolerant and the scrappiest among the smaller companies have remained, including JKX, Arawak, and Cub Energy.

Due to the need to fill the state coffers to pay back the forthcoming International Monetary Fund’s $17 billion loan, the Government of Ukraine is about to commit hydrocarbon hara-kiri. It has imposed exorbitant taxes on local oil and gas producers and is forcing them to sell their output to the government-owned monopoly. This is exactly the opposite of what one would expect from a reformist government densely populated with pro-market technocrats from the US, Lithuania and Georgia.

Kyiv’s new tax rates are mindboggling. First, there is a royalty, which taxes output sales, not just profits. Second, the rates are 70% for state-owned production companies; 55% on wells under 5,000 meters depth, and 35% on wells over 5,000 meters.

Complete story at - Ukraine's anti-market policies to make matters worse

Ukraine ends Russian gas subsidies - Business Insider

The government in Kiev is trying to do something that no previous Ukrainian administration has been able to — wean the country off its gas dependence on Russia.

In order to do that Kiev will have to remove energy subsidies that the government gives to households, something that its predecessors thought was a political poison pill that would sink any administration.

The IMF has spent years campaigning to get the subsidies removed, because they cripple the government's budget, and keep Ukraine under the thumb of Russia, which supplies the gas. (Both of those conditions thus make Ukraine a bad bet for IMF investment.)

Now, as a first step towards ending the subsidies, the Ukraine parliament has passed a bill that will triple the amount that domestic consumers pay for gas supplies used for heat.

Reform of the subsidies was a central part of the $40 billion bailout deal brokered by the IMF. Under the deal, the IMF will inject a further $17.5 billion into Ukraine in exchange for increased restrictions on state pension provision, a reduction in gas subsidies, amendments to the 2015 budget, new legislation to protect the rights of investors, and the provision of financial assistance for low income families.

The problem Kiev faces is that the government is attempting to do this in the middle of a crisis with price rises reportedly reaching hyperinflation proportions and the economy tanking.

Complete story at - Ukraine ends Russian gas subsidies - Business Insider

"Gas War" between Russia and Ukraine looms large over LPR/DPR gas supplies - Fort Russ

Vladimir Putin held an emergency meeting with the permanent members of Russia’s Security Council. The President instructed the government to strictly adhere to its contract obligations concerning gas deliveries to Ukraine.

“I am asking the Russian Federation government to adhere to the contract obligations, and fulfill them to the letter,” the President underscored.

Dmitriy Medvedev, in turn, said that Kiev will have to pay for all deliveries of gas to Ukraine, including the deliveries using alternative routes to the Donbass. If Ukraine will not pay for gas in its entirety, Russia will be forced to make a “complicated decision”.

“Our Ukrainian partners will either pay for everything we deliver, or we, as usual, will have to make a complicated decision,” said the Prime Minister.

A few days ago Ukraine stopped gas deliveries to the Donetsk and Lugansk republics. This caused an emergency situation, and the only gas available for deliveries is in Russia. Therefore, in accordance with government instructions, Gazprom redirected some of the fuel paid for by Ukraine’s Naftogaz to DPR and LPR using a reserve system.

Complete story at - "Gas War" between Russia and Ukraine looms large over LPR/DPR gas supplies - Fort Russ

RUSSIAN FEDERATION SITREP » American University in Moscow

RUSSIA HAS HAD ENOUGH. I agree, as I usually do, with Alexander Mercouris: here and here he argues that Putin and his team have given up trying for a diplomatic solution. Moscow used its influence to stop the rebels' offensive last year when they believed themselves on the edge of routing the Kiev forces, forced the Minsk ceasefire, made several proposals to Kiev and... nothing. I believe that Putin stopped believing anything the West said after Libya, but I think he kept hoping Europe would not be willing to harm itself in subjugation to Washington. Or maybe he just needed time; time to strengthen links with the BRICS and especially Beijing, time to de-dollarise (Russia is buying a lot of gold), time to build up and exercise the military; time to make his case to the "not-the-world” (I love this cartoon). I'm sure he has the next move figured out and I'm equally sure Brussels, Washington and their dependants will be just as stunned by it as they were the last times.

RUSSIAN ECONOMY. Two takes on it that argue that the situation is serious but recoverable:Goldman Sachs repeats points I have mentioned; Chris Weafer says rally but not boom. Yes inflation is up, yes the Ruble is down, but there much import substitute is going on, industrial and agricultural production continue to rise and unemployment is unchanged. As for rating downgrades,China has a different opinion. Time, as they say, will tell. But I'd bet on China.

DEMOGRAPHICS. Excellent summary by Anatoly Karlin. By the way, Russia now has a higher crude birth rate than anywhere in Europe.

GAS. After welcoming the decision to stop South Stream, the Europeans are starting to realise that they had better build some infrastructure to pick up Russian gas. Nordstream too. Or do without. Or find another supplier. Or something. They've got about four years. Here's the new reality.

FIGHTING. Putin made a last appeal for both sides to withdraw following the Minsk agreements but Kiev attacked. The "cyborgs” were driven out of the airport (your local media outlets took a week or so to tell you: here's The Guardian saying the Kiev forces had re-taken the airport. They didn't; cancel your subscription.) Another "cauldron” is forming and the neo-nazis are saying all is lost. What's their answer: coup or götterdämmerung?

HOW TO READ THE WESTERN MEDIA. When they say Kiev forces have re-taken the airport, know that they have lost it. When they say giving up South Stream was a defeat for Putin, know it was a brilliant counter-move. When they say Russia is isolated (a stopped clock, here's The Economist in 1999!), know that it is expanding its influence and connections every day. When they say Russians are turning against Putin, know that the opposite is true. When they speak of nation-building in the new Ukraine, know it's degenerating into armed thuggery (see video). Know that when they speak of Kyrzbekistan, they're not just stenographers, they're incompetent stenographers. Take what they say, turn it upside down, and you'll have a better take on reality.

Complete story at - RUSSIAN FEDERATION SITREP » American University in Moscow

The Vineyard of the Saker: Europe’s addiction to Russian gas: How long before withdrawal symptoms set in?

by Leonid Krutakov for Odnako

(translated by: Robin)

In mid-January, EU Energy Commissioner Maroš Šefčovič held talks with Gazprom CEO Alexey Miller and Russian Energy Minister Alexander Novak in Moscow. After the talks, Mr. Šefčovič expressed surprise at three circumstances.

First, Gazprom has no intention of building the South Stream pipeline. Second, in the future natural gas will be delivered to Europe via Turkey. And, third, Russia is not prepared to discuss the terms of its gas deliveries to Ukraine.

To quote Mr. Šefčovič, all three circumstances, were “very surprising,” even though Russia’s decision to cancel South Stream and instead build Turkish Stream was announced in December of last year in Ankara at a joint press conference held by the Presidents of Russia and Turkey.

It’s easy to wax ironic about Mr. Šefčovič’s ignorance of South Stream in Turkey. And most commentators did just that. But his attempt to discuss new conditions for gas supplies to Ukraine with his Russian partners deserves much more attention. And confirmation of that was not long in coming.

Last week, Russian Prime Minister Dmitry Medvedev convened a meeting with Messrs. Miller and Novak. He asked them for the details of their talks with Mr. Šefčovič, Ukraine’s gas debt and the repayment period. The meeting was broadcast live almost in its entirety.

Mr. Miller reiterated to Mr. Medvedev that Europe had only a few years to build its own transmission infrastructure to the Greece-Turkey border, where it will have to connect to the Russo-Turkish pipeline system. If Europe fails to do so, the gas will go to other markets.

And Mr. Novak pointed out that, when last year’s agreement on a $100 discount for gas sold to Ukraine expires on April 1, there will be no new discussions or agreements. The contract is valid and no one has cancelled it.

Complete story at - The Vineyard of the Saker: Europe’s addiction to Russian gas: How long before withdrawal symptoms set in?

Naftogaz to increase gas prices to limit usage in Ukraine?

But... but... Poroshenko just said that in 2 years, Ukraine won't need Russian gas. Seems some people didn't get that memo.

Naftogaz to increase gas prices to limit usage in Ukraine?

Gas usage in Ukraine in the first ten days of January 2015 exceeded by 23.7% the targets set by the government for industrial consumers, government financed institutions and district heating companies.

‘Ukrainian industrial consumers, government financed institutions, district heating companies and households used 1.9 billion cubic meters (bcm) of natural gas during the first ten days of January 2015’ reads a note released by Naftogaz on Monday.

Kiev decided in July that industrial consumers, government financed institutions and district heating companies would have worked to decrease their gas usage.

These three categories exceeded the December targets by 25.6%.

‘In volume terms, these three categories used 1.01 bcm of gas in the first 10 days of January versus the targeted 819.1 million cubic meters. Households used 914.5 million cubic meters in the first ten days of January’ adds the company.

Complete story at - Naftogaz to increase gas prices to limit usage in Ukraine?

Ukraine’s Budget: Gas vs the Wall | Ukraina.ru

Funds spent on the punitive operation in Donbas, “Project Wall” and private initiatives by Ukrainian oligarchs could have paid the country’s gas debt to Russia.

There is one thing that all those who support the Ukrainian authorities, all Russophobes and Bandera followers, all those who believe in “Russia’s weekly incursions” should do: print an image of the Great Ukrainian Wall and hang it on the wall so it keeps them warm throughout the cold season. They should do this because this wall will be built INSTEAD OF buying the natural gas that used to keep Ukrainian houses warm in the winter. That is until the adepts of European integration came to power.

It goes without saying that this wall will never be built. Funds allocated to this effect have already been stolen. Mr Yatsenyuk is saying that additional resources are expected to be allocated, which tends to prove that the embezzlement will continue. In fact, why miss such a great opportunity to siphon off some cash!

That said, the official price tag on this mediocre structure called “The Wall,” which can be regarded as a monument to the harmfulness of Russophobia (even though it is not expected to remain in place for long given how shabby the structure is), exceeds $4 billion. That would have been enough to pay off a large chunk of Ukraine’s gas debt. Just look at the image of the wall and imagine that your apartment is heated. Yatsenyuk is the person to thank for this, in case you were wondering.

Complete story at - Ukraine’s Budget: Gas vs the Wall | Ukraina.ru

CrossTalk: Turk Stream

Ukraine's Reserves Plunge 20% In One Month, Drop Below $10 Billion To Lowest In A Decade | Zero Hedge

Things for Ukraine are going from bad to worse.

Following the revelation that Ukraine's sovereign gold has mysteriously been Corzined, following a stunning admission by central bank governor Valeriya Gontareva on primetime TV that "in the vaults of the central bank there is almost no gold left. There is a small amount of gold bullion left, but it's just 1% of reserves" which however left many questions unanswered and which led to prompt legal action against the central bank governor who is being charged with criminal abuse of power and misuse of office under Article 364 of the Criminal Code of Ukraine, one would think that at least Ukraine's dollar reserves would have increased by a modestly proportional, if not market equivalent, amount.

Alas that is not the case.

As the central bank reported overnight, the country's foreign-currency (and gold reserves) dropped by over 21% in one month, to under $10 billion in November for the first time in nearly a decade due to large payments for debt and gas, from $12.6 billion to $9.966 billion.

The reason for the drop per the CB:

• A reduction of $1.45 billion due to the need to remit a portion of funds that Naftogaz of Ukraine has set aside in a restricted account with the National Bank of Ukraine in order to settle gas bills and arrears with Gazprom OJSC for natural gas imported in November-December 2013 (it remains to be seen if Gazprom confirm receipt or if the funds were merely wired... somewhere).
• A reduction of $897 million due to repayment and service Ukraine's foreign currency debt obligations, including the installment due to the IMF.
• Lastly, a reduction of $573 million as a resyult of intervention in the foreign exchange market.

Complete story at - Ukraine's Reserves Plunge 20% In One Month, Drop Below $10 Billion To Lowest In A Decade | Zero Hedge

EU to accept South Stream if compliant with legislation,says Bulgaria

The South Stream project would've been easily accepted if the project was compliant with existing European legislation, said the President of Bulgaria on Tuesday.

“The countries which show an interest in the implementation of South Stream did a lot of preparatory work and authorized the European Commission to hold talks with the Russian leadership so that a decision on the project can be reached. The decision is entirely in the hands of Russia and the European Union,” Rosen Plevneliev said on Tuesday, commenting on the Russian decision to shelve the South Stream project.

Russia’s President Vladimir Putin blamed Bulgaria on Monday evening, saying that Moscow is taking a step back because of Bulgaria’s delay in granting permission for the pipeline.

“I mean that we now need to start the construction of this pipeline in the Black Sea, but we cannot do that until we have Bulgaria’s permission. I think it’s clear to everyone that it would be ridiculous to start the construction in the sea, reach the Bulgarian shore and stop” Putin said on Monday, during a joint press conference with Turkey’s President Tayyip Erdogan.

Putin also spoke about the European Commission, adding that Sofia should ask for compensation from Brussels.

“If Bulgaria is deprived of the opportunity to act as a sovereign nation, then they should at least demand money from the European Commission to compensate for their lost profits, because direct revenues to Bulgaria’s budget alone would have been no less than 400 million euro a year.”

Complete story at - EU to accept South Stream if compliant with legislation,says Bulgaria

Kiev cheers South Stream’s demise | Ukraina.ru

NoBC4U Note: Clueless is as clueless does, I guess. Someone seems to believe that the cancellation of South Stream is some kind of victory.

The Ukrainian government welcomed Russia’s decision to scrap the South Stream gas pipeline, which would have bypassed Ukraine.

The comments were made by Ukrainian Foreign Ministry spokesman Yevhen Perebyinis.

"We regard the EU’s decision to abandon the project as logical and prudent," Perebyinis said. "Ukraine has always said that it is a reliable energy transit state. We have repeatedly proven this, and we continue to do so in negotiations both with the EU and with Russia. We intend to honor our obligations on energy transit to Europe."

Russian President Vladimir Putin earlier warned that gas supplies would be cut off if Ukraine started to siphon off gas in transit.

Experts believe that Ukraine’s gas reserves in its underground storage facilities will only last until February. Kiev-based expert Dmytro Marunych blames the worsening situation in Ukraine’s energy sector on Yatsenyuk’s government.

Complete story at - Kiev cheers South Stream’s demise | Ukraina.ru

The Vineyard of the Saker: SitRep Transcarpathia, Transnistria and Gagauzia 17 Nov - 23 Nov

SitRep Transcarpathia, Transnistria and Gagauzia 17 Nov - 23 Nov

A perambulation around the periphery of Ukraine, looking at local and regional viewpoints. The media coverage varies from relatively neutral to rabidly nationalist.

Note: some urls in the links are prefixed with 'z5h64q92x9.net/tr-url/ru-en.en/' . This form provides the reader with a Yandex translated version of the source. The original article can be reached by removing this prefix.

Kharkov has experienced numerous unexplained explosions may reflect actions by partisans. A recent status map shows the extent of purported partisan activity throughout Donbass. The connection from Kharkov to the border is interesting. Is there another voentorg in action?

Estonia - the national airline has lost 6.4 million euro as a result of the Ukraine crisis. The route Tallinin - Kiev has been severely disrupted.

Latvia seems to be feeling left out. It has claimed a Russian submarine passed about 27 miles from its territorial waters. This is seriously pathetic.

Galicia - low level discontent was exhibited at a recent football match. One of the teams, Shakhtar Donetsk, refused to wear T-shirts commemorating ATO forces.

Poland reportedly buying 40 AGM-158B JASSM cruise missiles from the US for around $250 million, with 50 % discount. These missiles have a range of 960 km, and an accuracy of around three meters. Even if you buy into the Polish missile defence is aimed at Iran and North Korea scam, these missiles certainly are not defensive and could reach Moscow.

Slovakia will continue to supply Ukraine with gas via reverse flow through the Vojny-Uzhgorod pipeline. This pipeline can supply about 30 million cubic metres gas per day from the Slovakian energy company Eustream. Slovakia claims to be able to maintain this despite a 50% decline in gas supplied to Slovakia from Russia. The head of the Ukraine gas company NaftoGaz claims this way Ukraine can completely avoid Russia as a gas supplier. He seems to be relying on ignorance of readers as to where Slovakia obtains its gas. The Ukraine gas company will defer any decision to buy further gas from Russia until 1 December

Complete story at - The Vineyard of the Saker: SitRep Transcarpathia, Transnistria and Gagauzia 17 Nov - 23 Nov (NEW FORMAT!)

Difficult times ahead for Ukraine's upcoming heating season

The de facto third gas war between Ukraine and Russia is only a part of a broader, difficult situation for the whole Ukrainian energy sector. This winter may prove to be one of the toughest for Ukraine, as its survival will require important sacrifices in terms of finances, cross-sectorial coordination, and society’s compliance. The challenge, however, lies not only in enduring the 2014/2015 heating season, but in ensuring that such a situation will not be repeated in the following years. The EU will help Ukraine provided that the latter commits to European rules.

Russian gas, which Ukraine stopped receiving on June 16, may reappear on the Ukrainian market according to trilateral Ukraine–Russia–EU meeting agreements. Gazprom will resume gas deliveries to Ukraine if Kiev covers its debt and pre-pays for deliveries at a price of $378 per 1,000 cubic metres (cm) in 2014, and $365 per 1,000 cm in the first quarter of 2015. Accordingly, but only in the event of significant gas shortages, Ukraine will consider purchasing up to 4 billion cubic meters (bcm), provided that Russia is able to allocate such amounts for export. Nevertheless, Ukraine approaches the heating season with its energy sector heavily undermined by the conflict with Russia, and still unclear prospects for survival during the winter of 2014/2015. The current crisis forced the Ukrainian government to reorganise its energy sector temporarily and, under pressure of the forthcoming winter, to take immediate supply-side and demand-side measures. Even though the status quo is unsustainable as a policy in the long term, the primary goal of the current energy policy is to ensure energy security for Ukrainian citizens.

The Search for Gas Supplies. Ukraine’s main problem is the availability of sufficient gas supplies, since domestic production and gas stocks can cover only 50–70% of Ukraine's needs. Ukraine’s own production of around 20 bcm annually has little (2–3%) margin to be increased this year. Possessing the largest gas storage facilities in Europe (31 bcm), Ukraine managed to pump nearly 17 bcm into storage, but from the beginning of the heating period on October 20 had already started withdrawing gas from it. The total amount includes active and buffer gas (5–6 bcm), which is important for the undisrupted functioning of underground gas storage facilities (UGSF). There are claims on ownership (made by oligarch Dmytro Firtash’s Group DF) of around 5 bcm gas in UGSF, challenging the further availability of sufficient gas for the winter.

In the absence of Russian gas, Ukraine has for the past few months been relying on reverse flows from Slovakia, Hungary and Poland, which currently account for the annual technical capacity of respectively 11.5 bcm, 6 bcm and 1.5 bcm. These are however short-term (often interruptible) contracts for the de facto re-export of Russian gas, subject to fluctuations due to pressure by Gazprom, which questions their legality. Finally, the short-term and relatively small-volume deal signed on October 3 with Norwegian Statoil allows Ukrainian Naftogaz to acquire 11 million cubic meters (mcm) of gas per day (for around $340 per 1,000 cm), under the mechanism of volume substitution through Slovakia. The outlook, though more positive, still does not guarantee closing the 3–4 bcm gap.

Complete story at - Difficult times ahead for Ukraine's upcoming heating season

Russia Can Survive An Oil Price War | naked capitalism

Yves here. This article is an important sanity check on the impact of the current oil price war on Russia. We’ve seen similarly skewed conventional wisdom on the Saudis: “No, they can’t make it on a fiscal budget basis at below $90 a barrel,” completely ignoring the fact that the Saudis clearly believe it is in their long-term interest to suffer some costs to inflict pain on some of their enemies, and render some (a lot) of shale oil and alternative energy development uneconomical, which increases their ability to extract more in the long term from their oil asset.

By Colin Chilcoat, a writer at OilPrice. Originally published at OilPrice

After a frosty reception at the G20 summit in Australia this week, Russian President Vladimir Putin required some much needed rest, at least according to the official explanation given for his conspicuously early departure from the proceedings. All things considered it could have been a lot worse. Russia finds itself in familiar territory after a controversial half-year, highlighted by the bloody and still unresolved situation in Ukraine. Nonetheless, the prospect of further sanctions looms low and Russia’s stores of oil and gas remain high.

Shortsighted? Maybe, but Russia has proven before – the 2008 financial crisis for example– that it can ride its resource rents through a prolonged economic slump. Higher oil price volatility and sanctions separate the current downturn from that of 2008, but Russia’s economic fundamentals remain the same – bolstered by low government debt and a large amount of foreign reserves. Moreover, Western involvement in Russian oil and gas plays is more pronounced than ever.

Economic diversification has not come easy for Russia, arguably for a simple, but effective reason; oil and gas are a source of tremendous wealth for the country. However, the dire straits of the 2008 global crisis illustrated the importance of financial diversification. Since then, Russian state-owned oil and gas giants Rosneft and Gazprom have increasingly allowed Western majors like BP, Eni, Exxon, Shell, Statoil, and Total access to some of Russia’s underdeveloped, but prized projects. Western companies have an estimated $35 billion tied up in Russian oil with hundreds of billions more planned and service providers Halliburton and Schlumberger each derive approximately five percent of their global sales from the Russian market.

The Western majors remain committed to their extra-national ventures and these powerful relationships ultimately limit the sanctions’ scope. Still, with their cooperation put on hold, Russia has been forced to look elsewhere, and increasingly within. Rosneft is set to announce new Arctic partners by the end of the year, a role formerly dominated by Exxon. China appears a likely suitor as the two countries have already embarked on a promising oil partnership in Russia’s Far East in addition to the highly publicized long-term gas deals. Domestically, Rosneft and Gazprom have strengthened their alliance and Putin has approved the creation of a state-owned oil services company.

Complete story at - Russia Can Survive An Oil Price War | naked capitalism

Russian news: Russia-Ukraine Gas Deal Unravelling - Russia Insider

Remember the gas deal that Ukraine and Russia signed on 30 October? It was supposed to end Ukraine’s gas crisis. How much gas has Ukraine actually received from Russia since they signed the deal? Short answer: none.

The problem with the deal is that it doesn’t solve the problem. Ukraine has no money to buy Russian gas. Although Ukraine has paid (as the deal requires) the first $1.4 billion installment to clear its gas debt, it has no money to pay for additional gas. Since the Ukrainians have no money to pay for gas they have no gas. It's as simple as that.

At the time the deal was signed there was talk the EU had given Ukraine a side letter saying they would help Ukraine pay for gas.

It is now clear the EU has provided Ukraine with no extra money to buy gas. The total amount of money Ukraine is getting from the west has not increased since the IMF and the EU agreed to their aid package in the spring. This is not enough to cover Ukraine’s gas bill this winter. As for the side letter, it has not been published and probably doesn’t exist.

So why did Russia and Ukraine sign the deal? The Russians couldn’t very well refuse after the Ukrainians accepted the offer the Russians made them back in June. The bigger question is why Ukraine signed the deal if it has no money to buy gas?

Complete story at - Russian news: Russia-Ukraine Gas Deal Unravelling - Russia Insider

Russia, China Sign Second Mega-Gas Deal: Beijing Becomes Largest Buyer Of Russian Gas | Zero Hedge

As we previewed on Friday, when we reported that "Russia Nears Completion Of Second "Holy Grail" Gas Deal With China", moments ago during the Asia-Pacific Economic Cooperation forum taking place this weekend in Beijing, Russia and China signed 17 documents Sunday, greenlighting a second "mega" Russian natural gas to China via the so-called "western" or "Altay" route, which as previously reported, would supply 30 billion cubic meters (bcm) of gas a year to China.

Among the documents signed between Russian President Vladimir Putin and Chinese leader Xi Jinping were the memorandum on the delivery of Russian natural gas to China via the western route, the framework agreement on gas supplies between Russia's Gazprom and China's CNPC and the memorandum of understanding between the Russian energy giant and the Chinese state-owned oil and gas corporation.

“We have reached an understanding in principle concerning the opening of the western route,” Putin said. “We have already agreed on many technical and commercial aspects of this project, laying a good basis for reaching final arrangements.”

RIA adds, citing Gazprom CEO Alexei Miller, that the documents signed by Russia and China on Sunday define the western route as a priority project for the gas cooperation between the two countries.

"First of all these documents stipulate that the "western route" is becoming a priority project for our gas cooperation," Miller said, adding that the documents provide for the export of 30 billion cubic meters of Russian gas to China annually for a 30-year period.

Miller noted that with the increase of deliveries via the western route, the total volume of Russian gas deliveries to China may exceed the current levels of export to Europe in the medium-term perspective. In other words, China has now eclipsed Europe as Russia's biggest, and most strategic natural gas client. More:

Complete story at - Russia, China Sign Second Mega-Gas Deal: Beijing Becomes Largest Buyer Of Russian Gas | Zero Hedge

Russian news: The Gas "Deal": Ukraine Says It Can Pay. Can it Really? - Russia Insider

It has taken only a few hours for the Russians and the Ukrainians to quarrel about the agreement that came out of the gas talks on Thursday. The Ukrainians say it is legally binding. The Russians say it is not.

The Russians are right. The Ukrainian published a statement that set out the terms of the Protocol (reproduced here). This says the Protocol is “without prejudice” to the claims being made in a case Ukraine has brought against Russia in the Stockholm Arbitration Court.

What this means is that the Protocol is not a legally binding agreement or contract. It is simply a temporary arrangement between the Ukrainians and the Russians until the final decision is made in the case at the end of 2015.

The Protocol settles little. It is simply Ukraine’s written acceptance of an offer to buy gas at a discounted price the Russians made as far back as June. The price now is a little lower than it was in June. This is not because the Russians have changed their offer. It is because the price of gas is linked to the price of oil, the price of which has fallen since June.

The Ukrainians have been in a position to buy gas under this offer ever since the Russians made it in June. They didn’t do so because they rejected the offer. They have now accepted it.

Complete story at - Russian news: The Gas "Deal": Ukraine Says It Can Pay. Can it Really? - Russia Insider

Thank You US Taxpayers: Russia-Ukraine Agree Terms On Gas-Supply Through March | Zero Hedge

Good news for the cold-showering, snow-covered Ukrainians... Russia has reached an interim agreement to supply natural gas to Ukraine through March according to Bloomberg. Of course, this will be paid for by more IMF loans (thank you US Taxpayer), pushing Ukraine further into debt and more dependent upon the West.

*RUSSIA CONFIRMS GAS SUPPLY RESUMPTION TERMS AGREED WITH UKRAINE
*GAZPROM, NAFTOGAZ CEOS SIGN AMENDMENT TO CONTRACT
*RUSSIA, UKRAINE, EU AGREEMENT TO COVER DELIVERY THROUGH MARCH

Terms...

*OETTINGER: RUSSIA TO CHARGE UKRAINE $385/KCM THROUGH MARCH
*UKRAINE READY TO IMMEDIATELY PAY $1.45B OF GAS DEBT: OETTINGER
*NAFTOGAZ TO PAY $1.6B AS 2ND GAS DEBT INSTALLMENT BY YEAR-END

Paid for by US taxpayers...

*UKRAINE TO USE EU, IMF AID TO PAY FOR RUSSIAN GAS: OETTINGER

As Bloomberg reports,

Ukraine and Russia reached an interim natural-gas supply deal in talks brokered by the European Union to secure flows before the heating season, a Russian Energy Ministry spokeswoman said.

The accord agreed by Russian Energy Minister Alexander Novak, his Ukrainian counterpart, Yuri Prodan, and EU Energy Commissioner Guenther Oettinger will enable resumption of deliveries of gas from Russia to Ukraine after they were halted in June in a pricing and debt conflict.

Complete story at - Thank You US Taxpayers: Russia-Ukraine Agree Terms On Gas-Supply Through March | Zero Hedge

A Bad Gas Deal For Ukraine As Europe Looks After Its Own Interests

NoBC4U Note: Fancy that. The EU is finally looking out for their own interests (maybe) instead of blindly doing whatever the USA demands. Who'd have thunk?

The BBC headline tells it all: Russia-Ukraine gas deal secures EU winter supply (via Ukraine). European officials also confirmed the message of the headline. Commission President Manuel Barroso triumphantly declared: “There is now no reason for people in Europe to stay cold this winter,” and European Union energy chief, Guenther Oettinger, announced he was confident that Ukraine would be able to afford to pay for the gas it needed (Says who?). Where are Ukraine’s expressions of gratitude and relief? They are lacking for good reason.

It turns out the month-long negotiations over Ukraine’s gas dispute with Russia were really about securing Europe’s Russian gas. Ukraine was only a side issue. Russia’s incessant propaganda that Europe itself was threatened by Ukraine’s gas cutoff dominated the discussion. Europe pushed Ukraine into a bad deal to protect itself.

What did Ukraine get out of the deal? It received the go-ahead to transfer some one third of the financial assistance it is receiving from the IMF and European Union to pay for the Russian gas, diverting scarce funds from its desperate defense, infrastructure, and reform needs. Ukraine gets to pay Russia one of the highest gas prices in Europe ($378 versus the $304 European average), and there appears to be no agreement as to how much of this gas goes to the gas-guzzling heavy industry of the Donbass, occupied by pro-Russian rebels. Kiev, by the way, has been virtually cut off from Donbass coal and has to buy elsewhere.

Europe has agreed that Ukraine should buy natural gas at high prices just at a time when Ukraine was taking significant steps towards developing interconnections with European suppliers and getting serious about cutting back on its high per capita natural gas use.

Complete story at - A Bad Gas Deal For Ukraine As Europe Looks After Its Own Interests

Alexander Mercouris: Deadlock and Gas Talks in Milan

by Alexander Mercouris

Deadlock in Milan

News from the Milan summit is still trickling through but it is clear that there has been no breakthrough and the Ukrainian crisis remains deadlocked. Poroshenko said that the “parameters” of a gas agreement have been agreed but it seems that nothing of the sort has happened.

The most fatuous comment of the day has come from van Rompuy, who called it “progress” because Putin is supposed to have said that he does not want a frozen conflict in Ukraine or for eastern Ukraine to become another Transdniestria. To see the absurdity of that comment just try to imagine Putin solemnly telling the Europeans the opposite: that he does want a frozen conflict in Ukraine and that he does want eastern Ukraine to become another Transdniestria!

Not for the first time Putin comes over as a man surrounded by dwarfs.

As I understand it the idea of a breakfast meeting between Putin and European leaders came from Merkel. With the German and European economies tanking in part because of the very sanctions policy she has imposed, Merkel needs this crisis to end. At the same time she remains utterly unwilling to take on the US and its European allies or the Atlanticists within Germany. She therefore looks to Putin to extricate her from the mess she has got herself into. However because she is not prepared to face up to the US and its allies or the Atlanticists she wants Putin to get her out of trouble by capitulating to all their demands. She tries to do this by applying “pressure” on Putin (that was what today’s breakfast meeting was all about) and then looks sullenly angry and baffled when it doesn’t work.

Complete story at - Alexander Mercouris: Deadlock and Gas Talks in Milan