Guest Post: Ukraine’s Two New Energy Deals

Tyler Durden's picture

Submitted by Scott Belinksi of,

If one was to believe the picture that most Western media outlets are painting, Ukraine has been lost to Russia. Though the country fought valiantly to sign an Association Agreement with the European Union in Vilnius, Lithuania last month, President Viktor Yanukovych suspended negotiations with the EU at the last possible moment, betraying Ukrainians everywhere. Two recent energy deals that Ukraine has reportedly made, one with Russia and the other with Slovakia, however, show that the reality of the situation is slightly more complex.

Claiming that Yanukovych had always wanted negotiations with the EU to fail would arguably be giving him and his advisors too little credit as political strategists. In terms of public opinion, signing the Association Agreement would have all but secured Yanukovych’s re-election in 2015, whereas his step down from the deal has visibly shaken his legitimacy as President to its core. Rather, too little attention is given to the very real economic pressure Russia has placed on Ukraine and the EU’s reluctance or inability to offset Putin’s ‘trade war’. Furthermore, while Yanukovych did not sign the Association Agreement in Vilnius, he did not commit his country to Putin’s rival ‘Eurasian Union’ either.

Prior to the Vilnius Summit in November, the Ukrainian government found itself between a rock and a hard place. On one hand, Russia was imposing exorbitant gas prices and devastating economic sanctions on Ukraine’s already fragile economy. By October 10th, 2013, trade between the two countries had fallen by 25% and prices for Russian gas, on which Ukraine remains dependent, stood at $420/1000 m3, $50 more than the European average. On the other hand, EU leaders refused to hold tripartite negotiations with Russia and Ukraine, instead using all their leverage to insist that jailed former Prime Minister Yulia Tymoshenko, convicted of abuse of office and embezzlement in 2011, be freed.

All of this comes on top of Ukraine’s dire situation. The country faces $10 billion in principal and interest payments next year and has the third-highest default probability in the world. In an address following his decision to suspend negotiations with the EU, Yanukovych stated, "I would have been wrong if I hadn't done everything necessary for people not to lose their jobs, receive salaries, pensions and scholarships.” While many Ukrainians and outside observers may not take the President’s words at face value, it is no lie that, had Ukraine signed the agreement, economic disaster would have been imminent.

Two energy deals

As there was little the EU could/would offer to offset the immediate Russian reprisals on Ukraine’s economy, the government renounced signing the Association Agreement. However, two gas deals currently in the works show that, far from being sucked forever into Russia’s orbit, Ukraine will continue to flirt with both East and West and, most of all, move towards energy independence.

While the exact details of the deal Yanukovych has hammered out with Russian President Vladimir Putin in Sochi last Saturday remain unknown, Edward Lucas, the international editor of The Economist claims that gas prices for Ukraine will be brought down to $200/1000m3 with a $5 billion cherry payment on top. Lucas also claims that Yanukovych has promised that Ukraine will join Russia’s customs union as part of the deal, though this has been virulently denied by the Russian administration. At the same time, payments for Russian gas transferred from Gazprom to Naftogaz between October and December 2013 have been deferred until the Spring of 2014, all of which gives Ukraine some much-needed breathing room.

On the Western front, however, Ukraine agreed on the conditions for a gas deal with Slovakia for importing European Union gas through Slovak pipelines. These new flows, including gas from Poland and Hungary, could exceed 10 billion cubic meters annually, enough to meet Ukraine’s entire import needs. The move, which has long been heralded as a strategy to curb Ukraine’s energy dependence on Russia, comes less than two weeks after negotiations with the EU broke down, questioning the dominant narrative that the Ukrainian government is content to sign itself away to Moscow.

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dcj98gst's picture

Everybody here is missing the point on Ukraine.  Its all about getting the corruption out of the system.  The EU deal would go a long way to doing that.  There will never be prosperity in the Ukraine until the corruption is rooted out no matter who they deal with.  so in the long run, the EU deal is better.

Non Passaran's picture

Maybe you missed the recent news about growing corruption throughout the EU?

Ghordius's picture

growing? slightly decreasing from high level, imho. what is indeed growing is lobbyism. a different form of corruption, again imho

ebworthen's picture

Out of the frying pan into the fire.

Brussels and the corruption of the EU make Eastern corruption look civil and modest.

hookah's picture

So you never visited Ukraine before.

Anusocracy's picture

What's the point?

Most people don't know what the fuck is going on in their own country. Example: US.

I just know that the EU/US is a more powerful enemy of freedom than Russia, therefore, the benefit of the doubt goes to Russia.

Ghordius's picture

ladies and gentlemen, the Second World War* and it's sequel the Cold War** are over

stop looking for the moral high ground (last seen in * and **), there is none anymore and anywhere

the US, it's NATO allies, Japan, China, Iran, the GCC, Russia, it's allies, Turkey, Brazil, India, etc. etc. are just power groups of people. sometimes called nations or states or alliances or trade blocks or whatever

Freedom is not what's about. It's about trade, finance, control, security, dominance, military and civil spending, jobs, social stresses, technology and change

the response to 9/11 could have been one that would have kept this high ground. but it's history, now. now this ground is lost

and so I think it's foolish to sigh for a sabre-rattling authoritarian sub-democratic nationalist and imperialist Russian... if you aren't at least a cultural if not ethnic Russian or at the very least a useful ally

which reminds me that I sometimes wish Russia, Ukraine and Turkey would join the EU, just to drive in that I do not consider myself on any moral high ground, neither

Banjo's picture

The people with money are corrupt. They just dress it up as having earned it and other such things.

Nothing new goes back to the days of Kings and Queens.

Stock Jobber's picture

So in order to have virtue one must stay as poor as possible?  That should be easy...

wizardofOZ's picture

Nope.... think of it like playing on hardcore level

Banjo's picture

See you probably think having 50K or 100K in your bank account is having money?


I'm thinking a few billion or at least a few thousand million. Hope that makes it a little clearer.

Bioscale's picture

Do you think that the corruption disappeared from Poland, Hungary or Slovakia after they joined EU? A BIG mistake. It's the same as before if not bigger due to euro money flowing from brusels. The only difference is that these countries must pay much more also to western bankers (moar debt, do not forget on ESM) and brusels and play the game US and friends play - which means be part of wars in Afghanistan and Iraq. Do not be fooled by the corporate media fairytales.

El Tuco's picture

There is something really fucked up when you can buy Russain Gas from Germany cheaper than what Russia wants to charge you. From what I understand there are some new deals for gas with Shell and Chevron


As soon as some of this additiional gas is available, Ukraine will be that much closure to being energy independent.


But at the end of the day this isn't about just energy. The mafia runs both countries (Russia/Ukraine) and both peoples are sick of it. 

skifff's picture

"As soon as some of this additiional gas is available, Ukraine will be that much closure to being energy independent." - there you go!

And that is exactly why Russia builds "North stream" and "South stream" pipelinesaround Ukraine, so Ukraine becomes compleetly independant of Putin's dictatorship asap!;-)))

Blood Spattered Banner's picture

Seriously?  Ask a Greek, Spaniard or Portugese how their "corruptless EU" is doing.

Turn off your fucking TV and open your eyes. 

Non Passaran's picture

How did those freewheeling capitalist citizens elect a socialist?

ebworthen's picture

I don't understand the rush to join Western Europe; do they want to be a Socialist "paradise" like France with exorbitant taxes and overunn with Muslims, or Greece with a German boot on it's head, or Cyprus and Brussels bail-in's (deposit theft)?

Sandmann's picture

Mexicans dream of living in the USA even though they can be fat at home........some people like the idea of moving to neighbouring countries like Ukrainians to the UK

TheGardener's picture

Must be some sort of a death wish unless they are implicitly
voting for a pan-Slavic thing stretching till the Atlantic ocean.

The latter would be an entirely different story, non pleasant but the other invasion at least being fought off.

El Tuco's picture

There is not much to understand when you have been under the yoke of Russia for the last 100 years. When a few million get sent to Siberia and another few million get starved to death and then people disappear and end up in jail for 40 years and all your worldly possessions are stolen from you and your not allow to travel anywhere and your people are displaced all over the empire and your country is hollowed out and raped.....I could go on but I'm not sure the folks here would understand.....

skifff's picture

"when you have been under the yoke of Russia for the last 100 years" you should make your facts strait it's not 100 years it's 1000's of years...;-)

What they call Ukraine nowdays is actually Russia... but you right people that call themselfs ukranians exist for about 100 years.;-) 

El Tuco's picture

Are you fucking retarded? Learn some history dumb fuck...



skifff's picture

Only dumb fuck in here is you, and it's obvious to most people in here...;-)

TheLoveArtist's picture

I think what is going one here is this, if you look up Ukrainian oligarchs you see most are Jewish, and they grabbed the goodies after Kuchma came to office and also the color revolution.  Now they want to join the EU so they can cash out and diversify by selling shares of these companies.  I think they are afraid that they will have their companies at some point and time taken away from them.  What better than to join the EU and legitimize their thefts and cash out on the stockmarkets of Europe.   Typical Jewish modus operandi.

UpAndComing's picture

There's always one...

I know a Jewish oligarkh who started out with just a jeans and computer of the back of a truck ands made his way to being one of the richest men in Odessa by simply being a smart businessman. One of the few that actually didn't hire goons to kill...albeit there were plenty of bodyguards and various issues to iron out pretty much every day. It's funny to me when people throw out the shit you just did and then others just nod like little bobbleheads. If you actually look at some of the richest names in that country, they are mostly ethnic ukrainians and that means your post and propoganda is fucking useless.

Rinat Akhmetov, Igor Kolomoisky,Victor Pinchuk,Gennady Bogolyubov,Serhiy Taruta,Vitaly Gaiduk,Oleg Mkrtchyan,Oleksandr Yaroslavsky,Volodymyr Boiko,Victor Nusenkis,Yury Kosiuk, Aleksei Martynov,Andrei Berevsky,Vasily Khmelnitsky,Sergei Tigipko,Evgeny Sigal, Petro Poroshenko,Leonid Baisarov.

I think your hatred is just for wealthy people in general...although some did happen to be of the faith you despise your sky cake is better than their sky cake.

The dude I mentioned earlier uses his money to renovate the city he's from. You should channel your hatred into useful energy...and do something useful too.

Wishin you a pleasant day


UH-60 Driver's picture

When the rich make war it's the poor that die.

The best way to rid yourself of an enemy is to make them a friend.

El Tuco's picture

Yeah, that'll work until the ass rapings start again.

With that kind of logic, maybe Americans should go over to North Korea and embrace Kim Jong-Un? make him a friend..

edotabin's picture

Aren't we all friends on facebook ?



RaceToTheBottom's picture

Yes, it is called the Rodman defense and comes with a free tat of your choice.

Kirk2NCC1701's picture

Interesting. It turns out that one of the world's largest EMS (Electronic Mfg Services) companies, JABIL (of St. Petersburg, FL), has a plant I western Ukraine.

How convenient for them, to get NG from Poland and Hungary, where they also have Mfg plants. 

On top of that, having the Ukraine plant ~ 50 miles from the EU, but not inside its borders (not inside the EU laws + bureaucracy), they can actually make things at affordable prices and still make a decent profit.  Clearly agent "Ona Top" did her job, to ensure the Happy Ending for the Executive Power Players.  ;-)

Tim Main (CEO) & execs must be smiling.  "X-Mass Bonus! Bump!"

Cognitive Dissonance's picture

"The country faces $10 billion in principal and interest payments next year and has the third-highest default probability in the world."

Hell.....that's just a few days of Fed pomo. Why doesn't President Viktor Yanukovych just give BernakYellen a call for a bridge loan?


CrashisOptimistic's picture

"On the Western front, however, Ukraine agreed on the conditions for a gas deal with Slovakia for importing European Union gas through Slovak pipelines. 

These new flows, including gas from Poland and Hungary,"


European Union gas also came from Gazprom.

Go here, select the gas button and select Hungary and Poland -- both are gas importers, not exporters.

Russia is the big kahuna and they are slowly converting that into dictating other country policies.

RaceToTheBottom's picture

I believe a longterm chess match is going on. 

Also important is the jockying over who and how middle eastern gas can get to Europe to balance out existing Russian suuplies.

Also European gas is cheaper regardless that the primary supplier is presently Russia,

Sandmann's picture

Ukraine is split between Western Ukraine which is Poland really and Eastern Ukraine which is Russian. The EU is being stupid, Russia cannot afford to lose Ukraine as a buffer state and the EU cannot afford economic aid to Ukraine.

Best option is to make Ukraine a gateway inside both Customs Unions able to give Russia a reason to keep factories there and the EU scope to set up JVs. Ukraine is run by gangsters and will simply siphon EU money off to Swiss banks......Ukrainians need a stable ecoomy and only Russia has the energy sources and Ukraine could serve Western Europe if China had less access to the EU

El Tuco's picture

You're a fucking retard, Geezuss learn some fucking geography/history before you open your shit trap. 


Jack Burton's picture

Jesus man. "You're a fucking retard". You call everyone on here who is not a Western Ukrainian right wing nationalist a fucking retard. Fuck off, nobody is listening but you. Your party is a tiny fraction of Ukraine, catholic and tied to Poland. The Ukraine has never been united, the cunts in the extreme west have always be calling everyone else fucking retards. You just carry on the tradition. You guys sure cleaned out the Jews when the German Army handed you the chance eh? Human rights my ass.

You have already called me a fucking retard, so big deal. If you want to play that game, you and your ultra right wing Ukrainan Party of Rome, are simply bigger feeble cunts than anyone else around.

El Tuco's picture

Listen cum guzzler your another fucking idiot go back to guzzling...

Son of Captain Nemo's picture

Let's see now.  Decisions... Decisions...

Do I go with what's behind curtain B) The one that has a neighbor that shares my border and that I've been in business with for about 1,000 years and all the natural gas and oil I will need. vs. curtain A) that has a loan package that guarantees me worthless paper in both (USD and EUR) burdened with debt as far as the eye can see in exchange for all of my Countries resources both mineral and agricultural, should I default on the adjustible rate interest payments which should be kicking in -oh lets see, within the next year?

Oh and if I go with what's behind curtain A) I'll also receive a free missile defense shield which really means offensive ballisitic missile pointed at my neighbor so that he will never be able to attack me -for you know just in case.

Thanks for giving us the complete story Scott Belinksi of, but where is Pepe Escobar when you need him most?!


HastaLaVista's picture

Yanukovich is 100% lier. I dont trust any word coming out of his mouth. If Putin will try to make any agreements based on Yanukovich's promises, then he's badly wrong. Hopefully, he isn't such dumb.

RetiredSilverBug's picture

Ukraine is a mess. The only real option for long term is to split country and let western ukraine (former eastern poland which was part of autrian empire) go. It was Stalin's big mistake to add eastern poland to USSR.

El Tuco's picture

The real mistake was your mothers not to abort you....

TheLoveArtist's picture

Tuco why are you being so bitter.  Last time Clint Putin Eastwood left you dangling from a noose with your trying to balance on a old wooden cross.

Jack Burton's picture

Bitter because the Ukrainian Catholic Western districts have not won a battle to control Ukraine in centuries. That makes him bitter. Keep trying. Isn't it your lot who joined the German Army in 1941 to aid the liberation of Ukriane?

El Tuco's picture

Whats wrong Jack...fight club to rough for you...cum guzzler...

El Tuco's picture

Not's all good...I thought it was fight club....

DeliciousSteak's picture

A new phase of a very old game. The area has been constantly "re-organized" for a 1000 years and there's no end in sight to the fighting.

_SILENCER's picture

We kick start Chernobyl and build glorious tractor factory!!

Salah's picture

Can I throw out the first monkey wrench?