Russia Halts Gas Supplies To Ukraine

Tyler Durden's picture

After weeks of worthless foreplay whose outcome was known from the beginning despite just as worthless EU middleman Oettinger assuring everyone a deal was imminent any second now, overnight we got the long-anticipated mutual defection outcome and - as we warned - negotiations between Gazprom and Ukraine/EU fell apart with the Russian energy giant halting supplies to Ukraine unless Kiev prepays any and all gas deliveries from now on. Gazprom said it hadn't received payment for a debt it put at $4.458 billion by the Monday deadline it had set. "Ukraine will receive gas only in the amounts it has paid for," Gazprom said.

The reason for the collapse in talks: Kiev wants to pay $268.5 per 1,000 cubic meters of gas - the price it had been offered when Yanukovich was in power - but, in a compromise last week, said it would agree to pay $326 for an interim period until a lasting deal was reached. Moscow had sought to keep the price at the 2009 contract level of $485 per 1,000 cubic meters, but had offered to waive an export duty, bringing down prices by about one-fifth to $385, which brings it broadly into line with what Russia charges other European countries.

In other words, the delta was less than $60, and certainly a "fair" offer to Ukraine considering it is what Europe pays. However, it wasn't low enough for Kiev, which certainly is out of money once again having to spend the bulk of its IMF/EU aid to keep its military armed, and the only logical outcome - one in which the country would no longer receive something for nothing - transpired.

This hardly will be surprising to anyone: moments ago Gazprom CEO Miller added that Ukraine is unable to pay for its gas obligations in arrears, something the Ukraine side had confirmed previously when Miller added Kiev had been pumping Russian gas in its underground storage facilities at a blistering pace preparing for just this eventuality.

End result, a few hours ago, Gazprom made the following announcement: "Today, from 10:00 a.m. Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies ... Starting today, the Ukrainian company will only get the Russian gas it has paid for."

Gazprom also warned EU on "possible gas transit risks", meaning since all the gas sent to Europe transits Ukraine, it was quite possible Kiev would simply continue to siphon off Russian gas without paying for it. The problem there, however, is that the parties impacted would be Ukraine's BFFs: Germany, central Europe, and, of course, the UK. And what better way to sow discord among otherwise bosom friends than have them start fighting for Russia's energy scraps...

And now the question: how long before Ukraine's alleged 14 BCM in gas held in storage runs out and Kremlin once again has all the leverage. According to simple estimates, a few months at most, and certainly just in time for Ukraine's winter.

Reuters has more:

Gazprom said on Monday it had filed a lawsuit at the Stockholm arbitration court to try to recover the debt, while Ukraine's Naftogaz said it was filing a suit at the same court to recover $6 billion in what it said were overpayments.


A source at Gazprom said supplies to Ukraine had been reduced as soon as the deadline passed. EU data suggested that volumes were broadly stable as of 0630 GMT (7.30 a.m. BST), but it could take hours for data on Russian gas flows via Ukraine to reflect any reduction in supply in Slovakia or elsewhere.


Any reduction of supply could hit EU consumers, which get about a third of their gas needs from Russia, around half of it through pipelines that cross Ukraine. Earlier price disputes led to the 'gas wars' in 2006 and 2009 and Russian accusations that Ukraine stole gas destined for the rest of Europe.


"The gas for European consumers is being delivered at full volume and Naftogaz Ukraine is required to transit it," Gazprom spokesman Sergei Kupriyanov told reporters.


Ukraine's Naftogaz declined to comment, saying it would issue a statement later in the day, but its pipeline operator Ukrtransgaz said it was operating normally.

The "market" was quick to react and "punish" Gazprom:

Russian shares fell on the talks' collapse, which will increase tensions between Moscow and the West and could make it harder to arrange a truce in east Ukraine, where Ukrainian troops are fighting rebels who want the region to be absorbed by Russia.


At 0740 GMT, the dollar-denominated RTS index was down 2.2 percent at 1344 points, while the rouble-based MICEX slid 1.7 percent to 1,476 points, with investors fearful of growing tensions after the failure of talks.


Western countries see the talks as a gauge of Putin's willingness to compromise and had been looking for signs that he was trying to avert the threat of more Western sanctions.


Tensions were already high following Russia's annexation of Crimea after Moscow-leaning president Viktor Yanukovich was ousted and pro-Western leaders took over power in Kiev.

And now that Russia has not only cut off Ukraine but is allegedly once again piling up troops at the border following this weekend's bloodiest escalation yet, it is surely time to BTFD and BTFATH at the same time, because very soon it will surely be time for "Mr Chairman/woman to get to work" and inject gobs more liquidity to give the impression that all is still well.

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Haus-Targaryen's picture

A different twist on the Ukraine Crisis;  

Having read ZeroHedge daily for a few years now, I can attest the few thousand of us who read this religiously are quite knowledgeable about BOTH sides of the Ukrainian conflict. We understand both Eastern and Western media are essentially propaganda outlets, we can accept the fact that both sides of the conflict have valid arguments, and can completely emphasize with the Western-Ukrainians not wanting a thing to do with Russia, and the Eastern-Ukrainians not wanting a thing to do with the EU. We understand why Russia acted quickly to take Crimea, both from a historic, cultural and military perspective – it makes sense, and they would be fools for not doing so.


However, what happens when we compare the justifications for the annexation of Crimea with another goofy landmass in what is today Eastern Europe – that of Königsberg, erm, I mean, Kaliningrad?


Crimera came under Russian control in 1783 when Catherine the Great conquered and subsequently expelled the Khanate, a vassal of the Ottoman Empire who’s primary source of revenue was selling over 2 million Russians and Ukrainians into the Ottoman slave trade. For the most part, (save for a few years during the Russian Civil war and the Second World War) Crimera always “bended the knee” to Moscow, until, Khruschev in a drunken stupor, gave it away to the Ukrainian Soviet Socialist Republic in 1954. Russia’s historic claim to Crimea is one that is substantial – and is as valid as the United States’ historic claims to the original Thirteen Colonies. (The Treaty of Paris was signed in 1783 ending the Revolutionary War and Great Britain “granting”American independence.)       


Königsberg, erm, Kaliningrad became a Prussian Duchy with ties to Poland in 1525 after Königsberg’s population became predominately Lutheran during the Protestant Reformation, resulting in the subsequent expulsion of the secular Teutonic Knights who founded the city 300 years before. Although a fief of the Kingdom of Poland, Prussia and Königsberg were distinctively“German” with their own culture, language (German), and religion (the Prussians were Lutheran while the Polish were Catholic). Then in 1701, before either Catherine the Great (1729), George Washington (1732), John Hancock (1737) or even Benjamin Franklin (1706) were born, Frederick Wilhelm’s son became the King of Prussia formally separating the Kingdom of Poland and the Kingdom of Prussia.


Although Prussia as a kingdom fought many wars with its neighbors from its founding in 1701 to its eventual destruction in 1945, the Prussians have found themselves at odds with various factions, having fought against the Russians (Seven Years War), the French (Napoleon) and even the Bavarians (War of the Fourth Coalition), now a part of Germany. Moreover, German unification was a Prussian idea, and the current state of Germany owes its roots to the liberalism espoused in places like Königsberg.

Another valid claim Putin lay on Crimea is that of culture, including language. In Crimea at the beginning of this year approximately 60% of the population was either Russian or their ancestors were Russian. The next largest demographic sub-segment was Ukrainians followed thereafter by the Tartars. Russian, at the time of annexation earlier this year was the predominate language in Crimea, and no one materially doubted the Russian population of Crimea voting to join the Russian Federation.


Unlike Crimea, contemporary Königsberg is overwhelmingly ethnically Russian, consisting of almost 85% of the population. The primary language in Königsberg today is Russian, and the overwhelming majority of people there identify themselves as Russian. However, like the Germans before the Russians, and the Prussians there before the Germans, the group of people who occupy this piece of ground do not see themselves as 100% Russian, but rather Russians living abroad, similar to the British who lived in Hong Kong before its return to China in 1999. There have been various attempts within, what is now the Kaliningrad Oblast to secede from the Russian, culminating with the Baltic Republican Party being officially banned in 2005. Lithuania has asserted claims to the territory since the fall of the Soviet Union. Poland has not produced any such movements, due to general fears that any changes in boundaries might “spawn competing claims on territory awarded to Poland at the end of World War II.” (Enlace to Exclave: Kaliningrad Between Russia And The European Union)


However, in recent years there has been a remigration of ethnic Lithuanians, Poles and Germans back into Königsberg, albeit slowly. If, however, Kaliningrad becomes “Königsberg” again (politically moreso than simply in name) – and somehow “opens up” to its neighbors, it is expected this pace would increase dramatically. Additionally, unlike Crimea, the Russian population in Königsberg is not native to the area, whereas the Russian population in Crimea is. This more or less negates the argument that “this land has always belonged to Russia” that was correctly used in the conflict in Crimea.


Lastly, the military comparison between Crimea and Königsberg/Kaliningrad exists, but works in differing directions. Both Crimea and Königsberg/Kaliningrad are warm-water ports for the Russian Navy, both have large Russian military garrisons, and while Crimea is of paramount strategic importance to the Russian Federation’s state security, so is Königsberg to the various EU-member states. It is a central European nation which can house the balance of the Russian military just a few hundred kilometers from Warsaw and less than 600 from Berlin.


So, while Putin has excellent historic, cultural and military claims to Crimea, Germany or a theoretical Prussian state has equally valid claims to what is now Kaliningrad. At first glance – it would appear I am advocating for the annexation of Kaliningrad or, in the alternative that Putin was wrong in annexing Crimea, this assumption is however, incorrect.


Putin must play his cards carefully; as the case he laid out for his Crimean annexation could be copy/pasted onto Kaliningrad with the greatest of ease. His own argument, could, and most likely will, be used against him. If recent history is any indicator, Russian warm-water ports keep getting thrown into a state of civil war, destruction, and chaos. Given that Kaliningrad has received more funding per capita ($159 per capita) than Ukraine ($109) from the West, since the fall of the USSR – it wouldn’t surprise me to see the West vs East shitstorm move north sooner rather than later.

I can think of nothing better than “Hey, dear people living in Kaliningrad, did you see what Germany did to the former DDR since the fall of the wall? Quality of life has improved, average income has gone up, environmental quality has improved, etc., etc., simply vote to join them, and you can receive all these benefits too.” If the EU could somehow collapse Kaliningrad’s economy, make quality of life quite difficult, and magically a civil war breaks out – this doesn’t seem out of the realm of possibility.

-- Haus-Targaryen

Newsboy's picture

C'mon, the czech's in the mail.

Latina Lover's picture

And good for another 30 points up on the S&P.   Just imagine the rebuilding contracts after WW3 is over.

Latina Lover's picture

I guess the White Stream Gas Line that was supposed to link up to the Ukraine via Crimea,making the Ukraine independent of russian gas, is no longer in the works, LOL

Vlad 1, Nuland 0


lakecity55's picture


(fixed. she has 2 passports?)

Ignatius's picture

Cash n carry, like the corner store.

"I'll take a couple of these Snickers, a soda and give me 5 billion cubic yards of Nat Gas."

"You need a bag?"


ILLILLILLI's picture

"No, she's waiting in the car..."

The Big Ching-aso's picture

I wonder how the Ukraine Free Shit 'Army' is gonna react to this.

topshelfstuff's picture
Ukraine: EXCLUSIVE Explosion rips apart gas pipeline supplying Europe

Panafrican Funktron Robot's picture

Should be an interesting instantiation of what LawsofPhysics frequently refers to re: supply lines, esp. energy supplies.  Generally speaking, laying the hammer down on energy is as much an act of war as launching missiles, though it has substantially better political upside to it (ie., the only play left for the Ukraine/backers is to strike militarily via either direct assault or false flag, and with that carries the negative political/strategic implications of being the first combat mover).

NidStyles's picture

I don't see how it's an act of war, and I honestly think people should stop viewing it as such. There is nothing wrong economically or morally with keeping your resources inside your borders and making use of them.


If you want to argue for abolition of borders, then sure you might have something there.  

CrashisOptimistic's picture

Cutting off food or water is considered a war crime under the Geneva accords.

Cutting off oil or gas is not listed as such.  Nor is cutting off ammo.  Nor would be cutting off flat screen TVs.  Nor funding.

However, in contrast to all of this, a naval blockade is indeed considered an act of war.

It appears that there is no formal definition for such things past the Geneva accords.



mkkby's picture

Russia hasn't cut anything off.  Ukraine can buy it at the price offered to everyone else.

Now, it might get interesting if they require payment in gold.

MeMadMax's picture

"for signs that he was trying to avert the threat of more Western sanctions."


That will go into the joke of the day book...

zerozulu's picture

Thanks for giving plenty of time to collect wood for coming winter.

Poundsand's picture

Naw...  Obama can just give a speech and tell those pesky Ukrainians to take a pill and relax.  We've got the extra gas and his speeches make getting it there a reality.

"Number 1, make it so."

Cognitive Dissonance's picture

Move along. This is not the major war the New York Times is looking for.

Latina Lover's picture


Be patient, the Ukies, manipulated by the USSA/Nudelmans, are dumb enough to make it a major war.

Bet we will see Dow 30,000 just before Multiple Mushroom clouds appear over the horizon.

CrashisOptimistic's picture

I don't quite get you guys and your talk about "major war".

Where is the oil going to come from for Ukraine to fight a major war?  Russia isn't going to fuel that and there is no other source.

lakecity55's picture

"...and we estimate 1.2 Billion broken windows..Eh?"
"Joe, get the smelling salts! Dr Krugman has passed out."

Latina Lover's picture

If the Ukrainian government just paid what they owed Gazprom instead of using batshit crazy tactics to try and intimidate the Russians, we would not likely be having this discussion.

Nevertheless, thank you for an interesting post.

Tabarnaque's picture

The Ukrainian puppet does what Washington DC tells him to do. And Obozo and his masters do not want to pay a penny to Gazprom.

sessinpo's picture

Tabarnaque    And Obozo and his masters do not want to pay a penny to Gazprom.


Um, Obozo already has. ANY dollar of aid osusidizes any cost Ukraine has, including Ukraine's gas bill.

FeralSerf's picture

Ukraine is bankrupt, but unlike bankrupt individuals, is unable to discharge her obligations in BK court.

Countries usually discharge obligations such as this with complete "regime change". Examples of this might be the Bolshevik government refusing to pay the debts of the deposed Czar or the Union's refusal to pay the Confederacy's debts after the War Between the States. These sort of "regime changes" seem to need to be violent rather than being done at the polls as Ukraine's apparently have (more or less).

AnAnonymous's picture

Fuck you, Kiev

A different twist on the Ukraine Crisis;

Having read ZeroHedge daily for a few years now,

Best comical duo lines this day.

Always makes you wonder why 'americans' spend so much resources on funding an entertainment industry when their delusion lead them naturally to this type of lines.

Latina Lover's picture

LOL.  Besides, what would you call  the courtesy of Gazprom putting the Ukraine on a prepaid gas regime?

From Russia, with Love?

For someone who supposedly reads ZH for years, you would know that this is fight club and we don't pull our punches, bitchez.

AnAnonymous's picture

LOL. Besides, what would you call the courtesy of Gazprom putting the Ukraine on a prepaid gas regime?

Doing the 'american' work. 'Americans' have announced they are on the way to isolate Russia and in their typical ways of doing it, they require to sort out what the russian interests are and what they are not.

For someone who supposedly reads ZH for years, you would know that this is fight club and we don't pull our punches, bitchez.
Been reading for years. Can confirm it is an 'american' fight club, with what it implies, like 'americans' prefer to stage fantasy fights instead of facing 'americanism'.

Speak of 'americanism' and reign supreme. 'Americans' are so in fear of 'americanism' that prefer to fight a staged version of you. Comfort and peace of mind.

Latina Lover's picture

Honestly Bro, I don't Grok you.  Good try anyways.

Haus-Targaryen's picture

I am not entirely sure what you are getting at here, but your inability to articulate your point speaks volumes.

Ralph Spoilsport's picture

Anonymouse is one of the thousands who read here but one who doesn't understand anything except that he doesn't like 'american citizen citizenism'. He does understand how to iron shirts.

DeadFred's picture

Anymouse has failed to say a single thing that convinces me he isn't a poorly crafted ChatBot. A classic Turing Test fail. Of course he may have real blood in his veins but he still fails the test of exhibiting human intelligence.

AnAnonymous's picture

Telling who is a human being, who is not, who is a sub human or a non human, typical 'american' business.

The 'american' nature is eternal.

sessinpo's picture

AnAnonymous   Telling who is a human being, who is not, who is a sub human or a non human, typical 'american' business.


That is not even a complete sentence.

Almost Solvent's picture

Where is AKAK when we need him?

AnAnonymous's picture

For 'americans', the group is all.

Gaining social value by defending the group... That would be fantastic.

AnAnonymous's picture

Not even a complete sentence.

Kirk2NCC1701's picture

Hmm... I think Yoda easier to understand is.

Uhura, can you help with the translation?

AnAnonymous's picture

'Americans' revel in wanton, blind hatred. When an 'american' is asked of the causes of their hate,it comes out of a cesspool of fantasy.

On the other hand, in all their history, they've put a special effort in crushing people who hate with causes. Hating is bad, say 'americans'.

That is because they know that, them 'americans', have been doing many things that human beings usually answer to with hatred.

Latina Lover's picture

In summary, I think you are trying to say is that Americans hate haters, yet are wanton and blind in their hatred.  Is this correct?

AnAnonymous's picture

'Americans' do not hate haters as 'americans' are haters themselves. And 'americans' worship themselves.

'Americans' hate on haters who hate with justification.

That is because 'americans' do many things that draw justified hatred.

On the opposite side, 'americans' hate but with no justification.

BeetleBailey's picture

Don't's's pussy must be itching...

AnAnonymous's picture

It explains it when 'americans' fail to recognize their own sense of humour.

Chaining up the two comments as it was done was excellent display of humour.

Almost Solvent's picture

Humour bloobing up like citizenizm.


Place head in Dutch O-Van, await methane injection, bloobing up deep breath now.

AnAnonymous's picture

Speaking of blobbing up, still now on this site about NAFTA.

Years ago, on this site, it was reported that 'americans' look to blob up.

Not only it was reported, but it was also announced that Europe was a done deal and that 'americans' were working at merging both north American and Europe.

Even better, it was foretold that 'americans' would prefer to talk about Europe (which is a done deal, they can pretend condemning at no risks, it wont stop the process) while avoiding to speak about the next step because this process is not yet beyond the point of return.

And what?

Still nothing about NAFTA.

The 'american' nature is eternal. And predictible.

TheFourthStooge-ing's picture

Alas, alas, three times alas, I told a comment less than a week ago regards NAFTA.

Sure, you can evaluate and disregards it as coming from an 'american'.

Still, cannot call it a nothing...