Ukraine Won't Pay Russia For Gas, Has Billions In Obligations Due; Europe Promises Aid Money It Doesn't Have

Tyler Durden's picture

About an hour ago, the head of Russia's top natural gas producer Gazprom said on Wednesday that Ukraine had informed the company it could not pay for February gas deliveries in full, further adding to tensions between Moscow and Kiev. Alexei Miller said Ukraine's total debt to Gazprom for gas deliveries was nearing $2 billion. "Our Ukrainian colleagues informed us that they would not be able to pay in full for February gas deliveries," he told Russian President Vladimir Putin.

As reported by Reuters, Miller added that Ukraine managed to redeem only $10 million on Wednesday from a total debt of $1.529 billion. He said that Ukraine's debt would rise by $440 million on March 7, a deadline for payments. In other words, as of this moment the Ukraine already owes Russia $2 billion, or about double what John Kerry announced to much fanfare, the US would provide the country with in terms of aid. And considering that yesterday Gazprom announed that beginning in April it would end the gas pricing discount to the Ukraine, which lowered the price of gas to $268.5 per 1,000 cubic metres from around $400, this accrual is only set to get bigger with every passing day, and very soon Ukraine may get no Russian gas at all which was and continues to be the biggest leverage Russia has over the country which nuclear power plants provide less than half of its electricity needs.

As a reminder, and as we have pointed out since the start of the Ukraine conflict, Gazprom, which meets 30 percent of Europe's gas demand, shipped 86 billion cubic meters, or over half of its total exports, to the European Union through Ukraine last year. Gazprom already warned Europe may see "fluctuations" in its gas delivieries from Russia.

A Gazprom spokesman said Russian gas transit to Europe via Ukraine was flowing normally. For now.

But gas is only the beginning of Ukraine's problems. As also announced about an hour ago, Ukraine's acting finance minister Oleksander Shlapak reported that the country needs to repay $10 billion by year end and that the country may ask for a debt restructuring. Naturally, absent outside help, no repayment is possible and the country will certainly default, which means someone has to step up and bail out the Ukraine. The only question is where this aid comes from: EU/IMF or Russia.

And that is the €/$64K question. Which is why also earlier today, the European Commission announced that it will provide Ukraine with 11 billion euros ($15 billion) in financial assistance to Ukraine.  As reported by RIA, European Commission President Jose Manuel Barroso said the aid package was designed to enable “a committed, inclusive and reforms-oriented government in rebuilding a stable and prosperous future for Ukraine.” The European Commission said in a statement that financial support would be provided over a two-year period from the EU budget and EU-based international financial institutions.

There is only one problem with Europe's aid:  the money is not only not "there," it is also conditional on individual countries getting approval from their populations, and most of it would come from the IMF, i.e. funded primarily by US taxpayers. As the WSJ summarized, "The EU said it would make at least $15 billion in grants and loans available for Ukraine in the next couple of years, although much of the money has strings attached and would need approval from member states and other institutions."

So basically, it comes down to a matter of timing and payment acceleration: if Russia really wants Ukraine to fold, it will make sure the bill is high enough and the gas shut off looming enough that the only source of funds would be Russia itself, not insolvent Europe. The last thing Putin will want is to give Europe the years it needs to figure out how to honor its bailout commitment (ask Greece). Which is why Medvedev has also announced Russia would be able to provide $2-3 billion immediately to Ukraine... to pay for the gas bill. Naturally, with a few strings attached.

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magpie's picture

Doesn't matter...US will start defaulting by CUSIP later this afternoon.

FreeSlave's picture

Kiev snipers hired (possibly) by Maidan leaders - leaked EU's Ashton phone tape 

 

http://rt.com/news/ashton-maidan-snipers-estonia-946/ and on youtube: http://www.youtube.com/watch?v=ZEgJ0oo3OA8

Tracerfan's picture

If this can be proven, the Kiev regime will collapse.

Rakshas's picture

isn't this the same play book the US NGO's used in Venezuela and Syria and can be verified by  ballistics i would think....... imagine if you  would an international community that cared about truth and justice so much that they put the same effort into getting to the bottom of a crime against humanity as they do in convicting a black man in the US of smoking a joint....... yeah i think I should be smoking a joint to even say something so silly as that.... 

TheFourthStooge-ing's picture

Sorry, but truth and justice are prohibited by law.

i-dog's picture

If I told my energy supplier that I couldn't pay my February bill, I'm not sure I'd receive much energy in March.

Perhaps I should become Too Big To Pay.

Oldwood's picture

Or, how many different ways can you say...default?

BobPaulson's picture

Zoom the camera out a bit. Cutting off people's gas only makes you money if you have alternate customers. This market is not like selling potatoes in the city square. The Saudis will tell you, when you restrict supply in a market with few suppliers and customers that big,  you don't always win. In addition, gas is a bit like electricity in that it is difficult to switch buyers due to the infrastructure needed to deliver the product.

Dewey Cheatum Howe's picture

Yep and now you know why Syria is so key in this and why the Russians are determined to keep Middle East gas out of the Nabucco from the south. The Russians in this can restrict supply and the EU will be forced to foot the Ukrainian bill to keep their gas flowing. You got a bunch a Neo Nazi NATO attack dog assets running the place who feel entitled to NATO's help and monetary support for their labor working as mercenaries for NATO through the usual mercenary army for hire types like Britam going back to the 90s in nthe Balkans and more recently in Chechnya alongside the Muslims there against the Russians. Even if they had the money they ain't going to pay the bill anyways since NATO owes them now...

CrashisOptimistic's picture

You are thinking non scarcity thoughts.

If you just realign your rationale to one of scarcity, different conclusions are reached.

If you have a customer who is not paying you for nat gas and you want to cut them off, but don't think you will find another customer -- this is not a negative.  The reason it is not negative is you retain the scarce resource for your own future use.

And nat gas IS electricity.  It's not just about heating.  44% of Ukraine electricity comes from natgas.

Urban Redneck's picture

Read my post on the math, look at the picture, and do your own math, the functions are rather simple, and not what the MAD warmongers makes them out to be.

johnQpublic's picture

truth and justice

lol

 

Tracerfan's picture

The leaders of Euromaidan hired the snipers who fired on protesters and police in Kiev, according to a leaked phone conversation between Estonian Foreign Minister Urmas Paet and EU foreign affairs chief Catherine Ashton, RT reported March 5. Paet said he spoke with a doctor who had treated sniper victims in Kiev and was told that the same gunmen shot both protesters and police.

PontifexMaximus's picture

I'm only waiting til they blame the muslim minority of the Krim tartars

ArgentDawn's picture

Of course RT would say that

Who Laughed's picture

*and at least one member of an EU govt.

Bindar Dundat's picture

I just listened tonthis tape and it sounds authentic.  The question becomes who leaked it and why?

pods's picture

The story said the phones were hacked.

Not quite sure what type of phone records conversations, but that is fishy. I doubt in the middle of this kind of crisis that Ukraine would be able to do that.

Now, Russia is another story.

pods

TheReplacement's picture

I've been waiting for proof of that conspiracy and I guess I still wait.  A doctor's examination of the wounds isn't convincing.  Both sides would be using the same firearms (AKs). 

What I have seen is video of the police holding AKs AND shooting at eye level toward targets that were not visible in the frame.  This is much more believable.

Oh well, keep looking.

Spumoni's picture

I'm tellin' ya, Ukraine, sell your pot to Colorado and washington. You won't need bailouts! You'll have friends in high places (snicker)!

dcj98gst's picture

They should just default and be done with it.  Why pay the bankers?

GetZeeGold's picture

 

 

All wars are bankers' wars.....including this one.

http://www.youtube.com/watch?v=5hfEBupAeo4

 

I'm getting excited.....almost half a million hits....that's a lot of useful idiots pulled out of the fire.

Pesky Labrador's picture

Facebook blocked that url link, bastards!

krispkritter's picture

 "If we could just make some payments...you'll take a check?  Why heck, why didin't you say so?  I thought you needed money. Hell, let's just pay the whole thing off right now..." A la Jeff Foxworthy  Financial Rope-a-dope.  Screw the IMF and Brussels

TheReplacement's picture

Because the article says that someone HAS to bail them out.  It has to be done or the world will end.

Harry Dong's picture

Sell some more farmland to China. Yeah, that's a good idea.

johnQpublic's picture

fuck growing food

all that grain was giving them gas

 

 

rimshot

Dorelei's picture

Let's send all the gold bugs flocking by millions over there  ! Don't they love their neighboors after all  ???

As for me , I'm king Midas and come daily here to take  my golden dump so I can pay the bill any time !!

GetZeeGold's picture

 

 

How ya doing king?

SoilMyselfRotten's picture

Find a toilet and spare the rest of us

GetZeeGold's picture

 

 

Hang them high......then do it again.

LawsofPhysics's picture

Correct, nothing changes otherwise. 

Josephine29's picture

This of course adds to the pre-exising problems of the economy of the Ukraine as discussed below..

We can feed this into the latest bulletin from the National Bank of the Ukraine which had a background of economic growth being -1.3% as of September 2013. Also industrial production in the year to November was 95% of what it has been in 2012. 


http://www.mindfulmoney.co.uk/wp/shaun-richards/where-next-for-the-econo...


It seems to be going from bad to worse....

tony wilson's picture

 

cant pay wonte pays

We are the 1%! Kiev gives oligarchs top jobs

 

https://www.youtube.com/watch?v=f-uQh6kQ_Qs&feature=youtube_gdata_player

6 of these gentle folks have dual ukraine and israeli passports

the rothschild soros squad

funny old khazar world

 

 

http://www.top10zilla.com/top/1751/

Kirk2NCC1701's picture

I don't doubt it.  +1 for investigative journalism.  But the more telling and pertinent trend is this:  Note the people from which countries and cultures who have climbed the fastest on the American totem-pole (economically and politically).

Jews and Asians (Chinese, Indian, Japanese, Korean). 

For $500 name the common denominator for these cultures, compared to the traditional European cultures in America? 

A:  ???  (Hint: To help you overcome your cultural blind-spot, think of what they are NOT.)

Element's picture

2 billion bucks of gas, extracted and pumped then used ... and not payed for ... that would seriously piss me off.

They sure as hell would not be getting any more.

 

thecoloredsky's picture

what about payment in gold?

semperfi's picture

somebody's gonna have to go back and get a shitload of (gold) dimes !

Clever Name's picture

Yes! German gold! It will take about 7 years...

Element's picture

I have a feeling it's going to be paid in real-politic.

adonisdemilo's picture

Sorry, already earmarked by the IMF

semperfi's picture

or bitcoin, fonestar's - he has a big stash, right old boy ?

SilverRhino's picture

It will be paid for in land.    All those Russian speaking parts of the Ukraine? ... say hello to East Ukraine.   

 

Spumoni's picture

Maybe they ought to consult with the Nigerians on pirating pipelines...

Kirk2NCC1701's picture

"They sure as hell would not be getting any more."

And HOW are you going to supply the EU when you cut them off? 

So far, the smartest suggestions I've seen are those that have the Russians asking to be paid in Gold.  Sorry fonestar, sorry Yellen.

jovius's picture

http://rt.com/news/ashton-maidan-snipers-estonia-946/

 

The snipers who shot at protesters and police in Kiev were allegedly hired by Maidan leaders, according to a leaked phone conversation between the EU foreign affairs chief Catherine Ashton and Estonian foreign affairs minister, which has emerged online.

 

“There is now stronger and stronger understanding that behind the snipers, it was not Yanukovich, but it was somebody from the new coalition,” Paet said during the conversation.

“I think we do want to investigate. I mean, I didn’t pick that up, that’s interesting. Gosh,” Ashton answered.

 

Game on now then.

agent default's picture

By investigate she meant we will find a way to cover this up.  At least fudge the issue, find ways to discredit the sources. 

jovius's picture

I especially like the understatement of 'Gosh'.