The Honeymoon Is Over: Ukraine To Stun Citizens With 40% Gas Price Hike

Tyler Durden's picture




 

Back in 2011, when as part of the Arab Spring one after another regime were toppled in North Africa following violent coups, not without substantial support by the US foreign service and the CIA, the local population was delighted - after all there is nothing quite like the specter of Hope and Change to lift one's mood, and murder the reigning dictator. Unfortunately, what is usually not discussed, is that within a very brief period of time, usually within a year or two, the post-coup nations promptly reverted to violence and kicked out the ascendent coupy rulers themselves. Hardly new, this is process has been observed in history throughout time, most notably with the French revolution, where the concept of the Thermidorian Reaction was first penned. Most recently, this was best captured by events in Egypt in the past year, when the Hillary Clinton-blessed regime of Morsi was toppled last summer with even more violent witchhunts organized against its Muslim Brotherhood supporters. No wonder one hardly hears a peep about this particular US success story.

So where should we look for the next such process? Why in Ukraine of course. Only right now the general population is still in its euphoric Hope and Change phase. Understandable - the evil regime has been toppled and the new and pure (even though in reality they are just as corrupt as the old ones) politicians are in charge, so why not look to the future with rose-colored sunglasses?

Alas, Ukraine's honeymoon period with its new rulers may end far sooner that most expect, and it will be certainly accelerated with news such as this. A few hours ago, Interfax reported that Ukraine expects to increase domestic gas prices by 40% once discounted import prices from Russia expire, the country’s Energy Minister Yury Prodan told journalists in the European Parliament on Thursday.

Just as we warned a few weeks ago when we were discussing the creeping capital controls gripping the crisis-riddled country with the foundering currency and its rapidly depleting reserves, the first thing that usually happens, with or without foreign aid, is runaway inflation. And a 40% jump in one of the core staples will certainly dent much of the quite brief and tenuous hope and change the population may have had as a result of recent events. Because once the downstream effects of nat gas funnel through the economy, we wouldn't be surprised if Ukraine ends up with hyperinflation of all goods and services within the year.

What is certain, is that the struggling population, most of whom never wanted the recent political overhaul and were quite happy with life as it was, will suddenly demand a return to the living standards under the old, if "horrible" regime, and demand an even quicker overhaul of the current administration.

Something Putin knows all too well.

Why does he know it? Because current events are a carbon copy of what happened in 2007 that led to the infamous 2008 Ukrainian political crisis.

What happened in 2007? This:

Ukraine agreed to pay close to $180 for every thousand cubic meters of natural gas it gets next year from Russia, Russia's state-run gas monopoly said, marking a nearly 40% increase over current prices.

 

The deal, which comes after months of negotiations between Moscow and Kiev, is part of what Russia describes as an effort to stop giving energy supplies to former Soviet republics at cut-rate prices.

 

That effort escalated into a full-blown dispute two years ago, when Russia cut supplies to Ukraine. The dispute affected some European countries, raising concerns about Russia's reliability as Europe's main energy supplier.

 

OAO Gazprom said Ukraine agreed in a deal signed by Ukrainian Energy Minister Yury Boiko to pay $179.50 for every thousand cubic meters it buys from Russia next year. Gazprom said transit prices would be set at $1.70, the price for gas shipping across Russia.

 

Ukraine currently pays $130 for every thousand cubic meters of gas from Russia.

 

In October, Russia urged Ukraine to make good on what it said was a $1.3 billion debt for gas shipments, a demand described by some Ukrainian officials as an effort to influence Ukrainian politics after September's parliamentary elections.

 

The deal comes a week after Gazprom said it would pay as much as 50% more next year for natural gas from Turkmenistan. Russia controls nearly all gas exports from the Central Asian nation.

Funny how history not only rhymes, but sometimes repeats itself. Verbatim.

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Thu, 03/20/2014 - 15:33 | 4573955 fightthepower
fightthepower's picture

Suck it Nazi's!

Thu, 03/20/2014 - 15:35 | 4573962 Divided States ...
Divided States of America's picture

I think more Ukranians may wish to go back to Russia after today's headlines.

Thu, 03/20/2014 - 15:39 | 4574001 fightthepower
fightthepower's picture

Lets see, Bank tax...Check, Gold Stolen...Check, Fuel Price increase...Check

 

Next, anything useful will be sold to Goldman Sachs.

 

Good Job dipshits...

Thu, 03/20/2014 - 15:41 | 4574015 BlackChicken
BlackChicken's picture

Freedom was never free.

Thu, 03/20/2014 - 15:47 | 4574053 Thought Processor
Thought Processor's picture

 

 

'Free' Market (Crony) Capitalism Baby.

 

Got a love it.

Thu, 03/20/2014 - 15:55 | 4574089 Dr. Richard Head
Dr. Richard Head's picture

I guess those fiat worshippers will be happy since price inflation mesans growth!!!! 

Thu, 03/20/2014 - 16:53 | 4574342 0b1knob
0b1knob's picture

What honeymoon?  I don't see how the analogy works, except for the fact that the USSA got fucked.

Thu, 03/20/2014 - 17:03 | 4574375 Latina Lover
Latina Lover's picture

Just the beginning of the IMF/Nuland fuck job.  I guess those Crimeans weren't so stupid for joining Russia.

Thu, 03/20/2014 - 17:17 | 4574419 PT
PT's picture

Whew!  Crimea got out just in time ...

Thu, 03/20/2014 - 17:19 | 4574424 ZerOhead
ZerOhead's picture

The real Ukrainian shitstorm hasn't even started yet...

Wait until those eastern factories that produce most of the nations exports (to Russia mainly) shut down. Lots of jobs will be lost and trade imbalance will kill the currency.

Then while the bankers suck the remnants of the carcass dry... the fertile farmland in the west will be auctioned off to German and US agroindustry.

Totally fucked. Good luck.

Thu, 03/20/2014 - 17:51 | 4574524 Freddie
Freddie's picture

All the US and western media is silent about the Nuland NWO ZATO Neo Con Nazi thugs running the coup.  Even places like National Review will delete any posts within seconds.   It is all eveil Putin. 

Thu, 03/20/2014 - 17:57 | 4574544 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Eastern Ukraine, exit stage right.... I meant to the Russian stage.

Thu, 03/20/2014 - 18:29 | 4574652 ZerOhead
ZerOhead's picture

< East Ukraine will leave

< East Ukraine will stay

As conditions are primed to deteriorate that is exactly what those in the East will soon be thinking... even the Ukrainian speaking ones.

Could you imagine Putin saying 'No' ?

Could you imagine Obama saying 'OK' ?

Thu, 03/20/2014 - 19:21 | 4574830 ptolemy_newit
ptolemy_newit's picture

repost:

Cruise Russia and Ukraine

Crimea should and is deciding its future based on security!  Russia should and is supporting the east of Ukraine to protect is notational security.  It will never back down from this.

Russia will end up with the industrial east, from Chernihivs’ka , taking Kiev airport (missile batteries and transportation)  and downstream to east of Ukrainka (artillery). 

Continue down the central river systems  to Kremenchuk and Uvileine (more airports goe to Russia).  Follow the water flow to complete control over Zapariz’ka and all the way to taking Kherson, complete the new(old) western Russia.

 

2/3 of Ukraine aligned with Russia, some by election, some by the USUK sanctions that will lead to civil war.  The eventual invasion forced by israeli acts of war.

Thu, 03/20/2014 - 21:05 | 4575196 Ifigenia
Ifigenia's picture

so the bread distribute to ukrainians by jewish Victoria Nulland in Maidan Square was poisened.

Thu, 03/20/2014 - 16:17 | 4574201 Lewshine
Lewshine's picture

40%?...That's a peach of a price! That should send the Dow to 20,000 in a hurry...In a faster hurry I mean.

 

All news is good news! To the MOON Alice!!!

 


Thu, 03/20/2014 - 15:45 | 4574036 SWRichmond
SWRichmond's picture

Lets see, Bank tax...Check, Gold Stolen...Check, Fuel Price increase...Check

Exactly.  Welcome to the EU, citizens!  Give us your money!

Thu, 03/20/2014 - 15:52 | 4574080 McMolotov
McMolotov's picture

The mafia is intellectually honest about what they do, which is more than I can say for these kleptocrats.

Thu, 03/20/2014 - 17:00 | 4574355 Divided States ...
Divided States of America's picture

Looks to me like the 'West' which brags about operating under the principles of democracy....BUT in reality only cares about money (tax levies, gas price hikes, stolen gold like fighty above mentioned)

while Russia (Putin), which the 'West' has labeled as a rogue evil empire, spent so much money in mobilizing its troops to protect his people, which depicts more of a democracy than what we find in the US.

The word 'Democracy' is just a load of baloney.

Thu, 03/20/2014 - 18:52 | 4574731 Againstthelie
Againstthelie's picture

 

When i came to power, i took over a nation which was a democracy. Indeed, as long as Germany was a democracy we saw that everyone in the world came to their help and aid. Yes, the German people used to live in a democracy, and had been plundered and squeezed dry. No, what does democracy or authoritarian state mean for those INTERNATIONAL HYENAS? They're not interested in either!

They are only interested in one thing: Is anyone willing to let themselfes be plundered, yes or no? Is anyone stupid enough to keep quiet in the process, yes or no? And when a democracy is stupid enough to keep quiet, then it is good! And when a authoritarian government declares: "You do not plunder our people any longer neither from the inside or outside, " then that is bad. (today: think about all the authoritarian states in the arabic world, that are alliies of the west)

 

If we, as a so called "authoritarian state", which differs from the democracies by having the people behind them -  (applause) If we as an authoritarian state had also complied with all the sacrifices that the INTERNATIONAL PLUTOCRATS burdened us with; if I had said in 1933, "Esteemed Sirs in Geneva what would you have me to do?" "Aha! We will immediately write on the slate: 6 billions for 1933, 1934, 1935, excellent, we will deliver! Is there anything else you would like? Yes, ofcourse, Sir, we will also deliver that!" Then they would have said: "At last a sensible regime in Germany."

 Adolf Hitler, Nov. 8th 1940, Munich

 

Putin will NEVER get a good Jewish press - as long as he stays the old Putin.

Thu, 03/20/2014 - 21:10 | 4575211 Ifigenia
Ifigenia's picture

Just like Michael Corleone and Hyman Roth

Thu, 03/20/2014 - 15:51 | 4574070 e_goldstein
e_goldstein's picture

Next, anything useful will be sold to Goldman Sachs

Expect to see a huge influx of Ukranian "massage therapists" on backpage.com in the coming weeks.

Thu, 03/20/2014 - 17:27 | 4574449 hairball48
hairball48's picture

If there's a massage therapist that's tall, lanky, and blonde, a sort of Ukranian version Taylor Swift, send her to me please!

:)

Thu, 03/20/2014 - 19:04 | 4574770 e_goldstein
e_goldstein's picture

Contact Blankfein, he's the pimp.

Thu, 03/20/2014 - 15:55 | 4574088 duo
duo's picture

Now if Russia goes to Latvia, Moldova, etc., and says "become part of Russia and we'll "cancel" your debt to the EU and Western banks", what do you think they would do?

global debt holiday coming.

Thu, 03/20/2014 - 16:11 | 4574168 hungarianboy
hungarianboy's picture

I smell the EU will step in and pay for the 40% what will cost the europe taxpayer.

 

Thu, 03/20/2014 - 16:50 | 4574325 KickIce
KickIce's picture

Welcome to America!!!

Thu, 03/20/2014 - 15:41 | 4574016 NYPoke
NYPoke's picture

Like the poor guy in the picture, not only is he about to get his head lopped off, he is going to get buggered at the same time.

 

Welcome to the European Central Bank Hell.  Comes at you from both directions.

Thu, 03/20/2014 - 15:47 | 4574048 Stoploss
Stoploss's picture

Now you know why he kept the tanks rolling..

He knew this was coming.

After today, i would expect every break away country in the region, to raise both hands and start waving.

This is how the EU comes apart.

Thu, 03/20/2014 - 15:44 | 4574033 Canadian Dirtlump
Canadian Dirtlump's picture

Doubtlessly when the people revolt, it will be Putin and his evil cadre of neo imperial demons who were busy sowing foment. how dare putin question deposing a legitimately elected government and installing billionaire oligarchs and neo nazis illegally.

 

Auterity is good for the soul and the waist line hey comrade?

Thu, 03/20/2014 - 15:33 | 4573956 McMolotov
McMolotov's picture

"Coups have consequences."

Thu, 03/20/2014 - 15:34 | 4573965 john39
john39's picture

this is one of those 'cost' things that the obama puppet is always going on about... 

Thu, 03/20/2014 - 15:42 | 4574022 BlackChicken
BlackChicken's picture

Barry, Barry, you're quite the fairy,
Look at how well you lie...

Thu, 03/20/2014 - 16:03 | 4574121 krispkritter
krispkritter's picture

 ...fairy, and your wife is SO damn hairy!  

Thu, 03/20/2014 - 15:39 | 4574005 prains
prains's picture

it's hard to make demands when your beholden to another nation for something as socially structural as your source of fuel for heat......the entire episode seems ludicrous...... Why antagonize your provider when you have no other alternative. Create an alternative then deal with your oppressor. It's all ass backward and could eventually lead the US to be able to manufacture their ultimate end game.....start a war involving Iran and engulf the entire globe in a killing field so they can reset their economy.

Thu, 03/20/2014 - 15:44 | 4574032 McMolotov
McMolotov's picture

It makes perfect sense when you realize Ukraine is unwittingly just a pawn to be sacrificed.

Thu, 03/20/2014 - 15:49 | 4574063 prains
prains's picture

politically yes but man on the street ukranian I'd say, no. they're not so unwittingly going to be sacrificed. Maybe they didn't run the entire end game through their heads when they ousted their resident gangster but I'd be surprised if they hadn't started to wise up to what the russian and american wise guys are up to now.

Thu, 03/20/2014 - 15:55 | 4574090 McMolotov
McMolotov's picture

I would hope so, but never underestimate the gullibility of most human beings. Propaganda is a hell of a drug.

Thu, 03/20/2014 - 16:00 | 4574116 prains
prains's picture

Eastern Europeans have been living under the jackboot of one gangster or another for all of modern history. Pretty sure at this point they've worked up an immunity to the propoganda drug. Less sure they have the real means to actually do anything substantial. We can take heed in the west and watch to see what the people can come up with as a real solution, if any.

Thu, 03/20/2014 - 15:34 | 4573957 Gene Parmesan
Gene Parmesan's picture

Ouch.

Thu, 03/20/2014 - 15:47 | 4574038 CrashisOptimistic
CrashisOptimistic's picture

Wait a minute. This article has a problem. There are two factors in play.

1) The IMF has DEMANDED that countries stop subsidizing energy costs for their citizens, if they want bailouts.  This was done in Egypt.  It was done to a small extent in Greece.  Subsidized fuel gets burned.  Period.  If the price is high, consumption falls -- and if you're not an oil or gas exporter, consumption kills.  Ask Japan.  So the undoing of those subsidies are going to jack up price and that's probably what this 40% is about.

2) GAZPROM cut the price of gas to the Ukraine in November by 1/2, as reward for embracing the Russian option and rejecting the EU option.  That choice of who to join is what set off the riots.  But the point is, Ukraine has broken the deal.  GAZPROM has to double their current price to get them back up to Europe prices.  They reneged so they have to lose that price cut.

So the price increase coming to consumers should be FAR more than 40%.

Thu, 03/20/2014 - 15:52 | 4574079 Thought Processor
Thought Processor's picture

 

 

Funny.   The countries in question were not subsidizing their energy, they were simply selling it to their own citizens at cost (you know, maybe because their leaders thought their countries energy was their peoples to begin with).

Guess that's a no no.

 

Though I notice that Saudi Arabia has been doing this forever and yet we hear little about the IMF having any problem with it.

Hmmmmm............

 

 

Thu, 03/20/2014 - 15:58 | 4574105 CrashisOptimistic
CrashisOptimistic's picture

The Saudis don't import oil.  Nor do they borrow from the IMF.

The issue is consumption.  Iraq this summer will have Honda generators out on street corners burning gasoline to make electricity for the city block and power air conditioning.  Why?  Because they domestically subsidize gasoline.  If it's cheap, it becomes the solution for problems -- and up goes consumption.

If you're an oil exporter, you can subsidize for your people and the only thing it costs you is export revenue -- and if you have enough of that you don't care, because you have saved oil for your people's future.

ZH is sloooowly evolving to realize that money and debt don't matter.  Only oil does.

Thu, 03/20/2014 - 17:14 | 4574389 weburke
weburke's picture

.

Thu, 03/20/2014 - 19:32 | 4574877 Poor Grogman
Poor Grogman's picture

"Money and debt don't matter eh"

Crap!

Tell that to a farmer who has been forced to take on more and more debt due to being further down the inflation chain I.e (further from the source of the new money).

Due to the lag between production decisions and the sale of farm produce, which often run to several years. Higher monetary inflation means higher land value therefore higher taxes, also requiring increased farm production

"Get big or get out" is the rallying cry. Which translated means "take on debt and become a Banksters slave"

The sad day often arrives when the sale sign goes up out the front.

Money and debt DO matter, just as chains and shackles matter to the
prisoner. Looking at the prisoner you could argue that food and water is their main requirement, but remove the shackles and free them and they could simply feed themselves.

Energy is a much greater problem than it otherwise should be, in part because the purchaser demands to pay only with colored confetti printed out of nothing...

Thu, 03/20/2014 - 16:20 | 4574206 No Euros please...
No Euros please we&#039;re British's picture

I beg to differ. It was NOT done in Egypt, ask BG Group about that one.

Thu, 03/20/2014 - 16:54 | 4574345 emersonreturn
emersonreturn's picture

thank you CIO, as always your comments clear some of fog.

Thu, 03/20/2014 - 15:34 | 4573958 TruthInSunshine
TruthInSunshine's picture

Bullish!

OT: Reporter: WH Press Secretary Gets Questions from Reporters Before Press Briefing

It's just a show.

8:43 AM, MAR 20, 2014 • BY DANIEL HALPER

http://www.weeklystandard.com/blogs/reporter-wh-press-secretary-gets-que...

Thu, 03/20/2014 - 15:35 | 4573969 john39
john39's picture

total shock.

Do NOT follow this link or you will be banned from the site!