Has Ukraine Shot Itself In The Foot With Gas Pipeline Deal?

Tyler Durden's picture

Submitted by Igor Alexeev via OilPrice.com,

Last week, Ukrainian Prime Minister Yatsenyuk pushed a bill through the Verkhovna Rada that would see his country’s gas transportation system sold off to a group of international investors. The provisions of the law would permit the transit of natural gas to be blocked. This decision may hurt the fragile industrial recovery in Germany and finish off Ukraine’s potential as a gas transit route to Europe.

Germany, which is the industrial heart of the European Union and a major creditor for its debtor nations, is facing the challenge of the double-edged consequences of its inverted Ostpolitik as it pertains to the trade in natural gas. Even the temporary transit risks ensuing from Kiev’s decision to block the pipeline may cause a business slump.

The Nobel laureate Joseph Stiglitz offered an unnerving forecast for the German economy. The Columbia University professor, speaking at the conference in the southern German city of Lindau, described economic growth in the Eurozone as “sluggish.” The German economy in particular failed to grow during the second quarter, threatening the EU’s fragile industrial recovery.

In the years to come, coping with Kiev’s attempts to jeopardize the gas-transit system and cut off Europe from its quintessential energy source in the east could become a real headache for Germany’s foreign minister, Frank-Walter Steinmeier. The most vivid example of Ukraine’s self-destructive policy that has the potential to affect European taxpayers is the recent sale of its gas transportation system.

The imminent agreement, with many conflicting political overtones, will allow sales of 49 percent of Ukraine’s gas transportation system to a cobbled-together coalition of foreign shareholders.

First, the non-transparent deal -- sponsored by high-ranking government officials -- is a textbook case of restrictive practices that violate World Trade Organization rules. Secondly, the pipeline itself is anything but an attractive offer.

The major players in the European energy market are very well aware of the quality of the asset. They know that the pipeline is sorely in need of repair and is dependent on gas from a third party. According to some provisions of the law, the transit of natural gas through Ukraine can be blocked. If it really happens, the pipeline’s price will immediately plummet to $2 to $3 billion.

Who would buy a broken-down car that can only run using your neighbor’s gas?

That’s why, in July, Prime Minister Yatsenyuk was so interested in pushing the bill through the Verkhovna Rada that he threatened deputies with his resignation. Last week Mr. Yatsenyuk finally succeeded in passing the buck.

For many years, Ukraine has argued that its gas transportation system is an asset of national importance that wasn’t for sale. But the Euromaidan protests changed everything. Ukraine’s new media reported that Chevron wants to buy into the country’s transit company. While the official representatives of the corporation declined to comment on the “rumors,” last year Chevron co-sponsored a conference, “Ukraine in Washington 2013,” which starred the U.S. Assistant Secretary of State Victoria Nuland. Her deep involvement in Ukrainian politics, along with her unorthodox but honest vision of the EU, is generally well known.

In passing the new law, government officials in Kiev and the Verkhovna Rada (now dissolved) ignored the fact that the majority of business-savvy Ukrainian voters would never approve the all-Ukrainian referendum on the summertime sale of the country’s last reasonably valuable asset. After all, the industrial region of Donbass has been irrevocably lost and the country needs to collect taxes.

The situation surrounding the pipeline deal is reminiscent of the tactics of the United Fruit Company in the mid and late 1960s. Radically right-wing governments were installed in Central and Latin America and that corporation gained control over those countries’ main export, bananas.

In Eastern Europe, many countries are not ready to follow Ukraine’s footsteps and renounce energy sovereignty. It’s no longer fashionable to be a banana republic. The deep-seated crisis in Ukraine and the success story of Nord Stream have encouraged other EU countries, such as Hungary, to diversify their natural-gas supply routes. Hungary’s secretary of state for public diplomacy and relations, Zoltán Kovács, recently quoted a statement from his country’s prime minister, Viktor Orbán: “No one can question our sovereign right to guarantee our natural gas supplies.” The leaders in Budapest are sure that no economic recovery is possible in Germany and EU without long-term natural-gas contracts. All EU members will benefit from stable regional trade patterns.

Events in Ukraine should not dominate the agenda of the whole continent. That would simply be dangerous. It has already become a cliché to compare the Ukrainian crisis with the Spanish Civil War. A couple of years ago, the total “Ukrainization” of EU policy would have been perceived as a bad joke. Today 300,000 jobs are at stake in Germany and it is high time for Berlin to step in and prevent the nationalist frenzy in Kiev from ruining decades of successful business cooperation. Heiko Lohmann, a German natural-gas expert, believes that a fundamental prerequisite for normalization is the continuity of energy relations.

Viewed from this perspective, Hungary’s position looks much more “pro-European.” Interestingly, the EU’s official energy policy papers (the European Ten-Year Network Development Plan (TYNDP 2011-2020) and Energy Infrastructure Priorities for 2020 and Beyond) contradict the hardline political statements of the acting members of the European Commission. According to the published data, Brussels expects to increase natural gas imports from Russia up to 40 percent. Time will tell whether Ukraine’s problem-plagued gas transportation system will play any role in these plans.

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knukles's picture

Joey Biden Jr gets rich quick!



gee thanks, dad.... no problem, son....

Latina Lover's picture

If you looked up the world stupid in a dictionary, likely  beside it is a picture of the Ukrainian Government Cabinet. 

The strings attached to their mouths are held by ReichsFuehrer Nudelman of the USSA state department, who in turn is a meat puppet of the Biden and his energy controllers.

Ultimately this disgusting menagerie is controlled by banksters lusting to steal Russia from Russians and enslave the rest of the world.

john39's picture

sweetheart deal to some of his cousins in Tel Aviv...

knukles's picture

Lesson to be learned:


NAVAJO MESSAGE TO THE MOON When NASA was preparing for the Apollo Project, it took the astronauts to a Navajo reservation in Arizona for training.

One day, a Navajo elder and his son came across the space crew walking among the rocks.
The elder, who spoke only Navajo, asked a question.

His son translated for the NASA people:
“What are these guys in the big suits doing?”
One of the astronauts said that they were practicing for a trip to the moon.
When his son relayed this comment the Navajo elder got all excited and asked if it would be possible to give to the astronauts a message to deliver to the moon.
Recognizing a promotional opportunity when he saw one, a NASA official accompanying the astronauts said, “Why certainly!” He then told an underling to get a tape recorder.

The Navajo elder’s comments into the microphone were brief. The NASA official asked the son if he would translate what his father had said.

The son listened to the recording and laughed uproariously. But he refused to translate.

So the NASA people took the tape to a nearby Navajo village and played it for other members of the tribe.
They too laughed long and loudly, but refused to translate the elder’s message to the moon.
An official government translator was summoned. After he finally stopped laughing, the translator relayed the message:

h/t stevengoddard   http://stevengoddard.wordpress.com/2014/08/28/navajo-message-to-the-moon/

McMolotov's picture

"I'm from the government, and I'm here to help."

jbvtme's picture

cop shoots himself in the foot (forward to 1:00 min)  https://www.youtube.com/watch?v=rSTIV2esa-k

McMolotov's picture

He thought it was a dog.

jbvtme's picture

the bottom of the gene pool lives

the phantom's picture

I think the title of any article can start with:

"Has Ukraine shot itself in the foot with __________"... and it would be correct.

SamAdams's picture

This was the game all along.  Cut off Putin's Gazprom influence on the Euro-zone. 

Dragon HAwk's picture

if a cops shoots a dog, he better have teeth marks in His Uniform..

 but that's just my Opinion...

Kirk2NCC1701's picture

It's not so much that they've shot "themselves" anywhere, but that those goys are the Useful Fools for a much bigger and more profitable Game.

Soros & Friends are licking their chops at Ukraine:  the New Kazaria.  Located nicely along the New Silkroad.

Ignatius's picture

A) create conflict,

B) asset/real estate prices plummet,

C) buy war-torn assets on the cheap,

D) Oligarchs have orgasm as peace is declared and business resumes

SWRichmond's picture

Shorter version:

1.  Coup

2.  Asset-Stripping

Tjere is never a shortage of politician-wannabees who are willing to be the face of "change" and who are willing to do whatever it takes to become "players" on the stage.  There is similarly never a shortage of behind-the-scenes bankster types who will finance them, give them the "power" they want, and maintain the real power from behind the scenes while getting richer.

Same old game, different millenium.

Idaho potato head's picture

Only one small problem, Novorussia.

ChiangMai's picture

"If you looked up the word stupid..."

Here's something smart — though, of course, not coming from the government:

The Ukies are losing, badly.  All the reports from Novorussian sources agree that the Ukie forces are either surrounded or in full retreat.  But Ukies sources also confirm this…many Right Sector protesters …are demanding the creation of a "generals battalion" which would be formed of only generals who would be sent to fight personally...

— August 29th 15:35 UTC/ZULU Ukrainian SITREP

    The Vineyard of the Saker

Jack Burton's picture

When watching videos coming out of the war zone, you often hear rebels mention Gas Fracking in Donbass, by Western Companies as a reason for fighting. Rich agricultural land will be fracked with no regard to possible consequences, and all the profits will leave Ukraine into Wall-Street Banks. Funny enough, guys with guns KNOW this, and say that they fight to prevent this. Obviously, Eastern Rebels do NOT watch CNN!!

Sandmann's picture

Have you looked at Burisma Holdings website - registered in Limassol, Cyprus with Hunter Biden on board and Devon Archer, former campaign manager for John Kerry and two former I-Bankers from the US plus Washington-oriented Young Communist Alexander Kwasniewski of Poland all ready to drill in Donetzsk ?

Not Too Important's picture

Is this like the UK .gov allowing fracking under everyone's residential homes, regardless of mineral rights or safety considerations?

"This week, UK government’s plans to offer automatic access rights to energy companies to drill in residential areas below 300 metres face fresh opposition. The Scottish energy minister, Fergus Ewing, slammed the “gung-ho” proposals to relax landowner regulations, arguing that the decision on such an issue should be with Holyrood and not Westminster. Ewing accused the Westminster government of removing the rights of Scottish householders and failing to consult with the Scottish government on the plans."


First thing the Scots are going to do after voting for independence is protect their people and agricultural areas from maurading fracking companies.

Imagine the US .gov allowing fracking under everyone's homes, whole cities, with no right of refusal. Oh, wait, kill us all off with Ebola and all protesting goes away, and anyone left will be too weak to complain. Lots of fresh water to frack with, too, because there won't be any people drinking it.



Winston Churchill's picture

You never had mineral right under your English castle.

I found that out when I bought my first house there.

You may own the land, and the house, but the crown owns whats below and above it.

Anarchy 99's picture

fuck the brits and their dog faced inbred royalty

(only those that believe in this royalty bullshit anyway)

Jack Burton's picture

Scotland has good reason to seek sovereign power over their nation. England is going off the rails, Cameron and his open borders policy, his housing bubble economics, his reliance on the City of London Banks, and now this law on fracking which steals people land rights out from under them. Scotland is forced to accept this because they are not sovereign.

East Ukraine is being set up by Kiev to be looted of all it's mineral and gas wealth. Perhaps fracking has a place in Ukraine's east, but they want to control it, NOT Kiev who whores itself out to Wall Street. Do not mistake this, Many Ukrainians are wild about the coming American led fracking boom on their soil. They want to be sovereign and to decide HOW it is done and not be slaves to Kiev who sells out to Wall Street for bribes and jobs in US fossil fule interests.

Chupacabra-322's picture

Another Bankster War. BRICS Central Bank Vs. The Criminal IMF / World Bank / BIS / EU / UNITED STATES, CORP. INC. / NATO

The Gazprom pipeline which Russia provides the Ukraine, EU & Germany is at stake. The Criminal UNITED STATES, CORP. INC. / City of London is Blood Thirsty.

The encircling of Russia via NATO will continue. It's obvious the Oligarch Pure Evil Zionist Psycopaths are going "all in."

Nothing short of Total Complete Full Spectrum World Domination will stop them. The Sampson Option will be the end result.

Omen IV's picture

NOT stupid ----  Yats is directed every step of the way - they want veto power on any Russian gas transit at any time - so the gas is deemed to be "intermitent" - which means it could be curtailed on any "pretext" while some would argue the Donbass gas potential for shale could serve the supply needs it is speculative and shale cannot be reliable long term asset

the price of $2-3 Billion is reasonable given "any" state of repair because of the right of way is established - once the money is stolen  from the sale the state is bankrupt - its over for the entire north - they own nothing and cant pay for gas

This is US talking - they want to control EU via multiple routes to include syrian route for Qatar / SA gas supply - forces more and more for Russia to go east to china and cover its long term market with EU ancillary/ suplemental market status

EU industrial businesses (steel / glass / metal bending of various kinds)  could be very cheap purchase very quickly which may be the ultimate game for US PE

must take east to west Uk  to include Odessa and put new spur farther south which could be cheap to do  - put in 400,000 Uk Separatist Army to protect the homeland and pipeline from NATO

Fascists keep ratcheting up - while ISIS is boiling  - Separatists needs to finish the deployment with other regions

Latina Lover's picture

Omen IV,  interesting analysis.  This may be the back up plan  or consolation prize given that Crimean and Donbass fracking are off the table.   If I were to guess, however, the USSA criminals could buy it cheap, stab the Ukies and cut a deal with the Russians, collecting fees for gas transit.

Anarchy 99's picture

yes possibly but, not that complicated really,(IMHO)

EU forever in need of energy and never self sufficient, they though they could out smart  Putin and steal Russia's energy, Putin  politely told them to keep sucking US dick, (poland in the lead of course).

now EU realizes Russia's gas needs to be paid for, Putin needs 2-3 years max of payments from the EU, after that he'll have all the customers he needs out East, leaving the EU stuck between a rock and a very cold place.

May I add, the US without Europe is nothing.  think about it.

Freddie's picture

Yats - what a dual citizen piece of shit. He is Nudelman's guy.

This is pretty funny.  Today, I get a resume out of the blue and I do not have a company or work for a company.

A young lady probably 30 ish who graduated from a known black college.   Working for JPM in Chicago looking for a job!  LOL!  Irony.   Blasting her resume out to people as spam on blind emails while still working at JPM in that hell hole known as Chicago. Not very bright way to look for a job.

Her race and Chicago are not a barrier but I would never hire anyone who had worked for JPM.  Maybe I will send her a nail gun.

I am not a cold hearted bastard and best of luck to her but I did not vote for this and I am sure she did.

SAT 800's picture

Yes. I would imagine this was the chief reason why this temporary prime minister was installed in this temporary "goernment" in Ukraine; to facilitate control of the resource and the profits by US "fat cat insiders".

JustObserving's picture
Has Ukraine Shot Itself In The Foot?

Head is more like it.  That comes from eating Nuland's cookies, welcoming the songster of the Hanoi Hilton, and being America's bitch.

The hundreds of American advisers the Nobel Prize Winner has sent will never Ukraine.

Kirk2NCC1701's picture

<-- New Russian pipelines to EU (bypassing Ukraine)

<-- Qatari/Saudi pipelines to EU

Who gets there first?

Canadian Dirtlump's picture

You can say that again james tiberius

Kirk2NCC1701's picture

<-- New Russian pipelines to EU (bypassing Ukraine)

<-- US pipelines to EU (from Africa, via Spain and Italy)

Who gets there first?

Not Too Important's picture

I'm still waiting for Putin's response to US shelling in Syria. He's been supporting Assad so far, along with Iran, I can't imagine he's going to let Assad get IS'd.

Kirk2NCC1701's picture

I'm still waiting for Putin to install Anti-ICBM rockets in Cuba, in response to the same move by US in Poland. 

And also to build/expand its Naval Base in Cuba.  It's all to prevent Latin countries from attacking Cuba, of course.  ;-)

SAT 800's picture

To sum up; Ukraine didn't do itself any favors; but the regime in Kiev wasn't installed with benes' for Ukraine in mind. I especially liked the reference to the United Fruit Company and their famous "Banana Politics".

Monty Burns's picture

The regime in Kiev was brought to power by Jews in the US State Department while the President, PM and major regional Governors are Jewish even though they make up 00.02% of the population.  First task was to transfer Ukraine's gold over to the NY Fed....for safe keeping, of course.  Next step seems to be to sell off the gas infrastructure. With nothing of value left watch these particular rats desert the sinking ship in the very near future.  Job done.

Reptil's picture

OVSE said:
"The Russian representative to the OSCE Andrey Kelin has given a firm response to the allegations, saying that "We have said that no Russian involvement has been spotted, there are no soldiers or equipment."
"Accusations relating to convoys of armored personnel carriers have been heard during the past week and the week before that," he said. "All of them were proven false back then, and is being proven false again now."
"There is no sense in these accusations," he said."

Russia prepares their own "peacekeeping force" (yup that's the invasion you've always wanted)

as an answer to Yatsenyuk (the guy that said he wants to rid Ukraine of "subhumans") applying for NATO membership
(which isn't possible, since Ukraine's in a conflict, but who cares about the small print nowadays)

and to top it off with some true Orwellian crap, here's the OFFICIAL statement of the Dutch Government, regarding the "NON DISCLOSURE AGREEMENT" with Ukraine, Belgium, Australia on the MH-17 investigation. jup they signed an agreement with the nazi-boys in Kiev, whom many (incl. myself) suspect took the MH-17 down.
which prompted MPs to ask questions in parliament:

"The (government of) The Netherlands has, is now known, signed an agreement on August 7 with Australia, Belgium and Ukraine on the investigation into the cause of the plane crash with MH17. According to a press release in English on behalf of the four countries and the European judicial organization Eurojust.
Part of the agreement is that the signatories to retain control of the information they contribute. So they can cast a veto on disclosure of their own data. Such agreements are often made ??in international studies where sensitive information, for example, intelligence is shared.
Remarkably, Malaysia has not signed, while the country had one of the first researchers on the site of the disaster the agreement. According to the Prosecution Malaysia is taking part in the exchange of data, but did not sign the agreement. A spokesman for the National Office will not say why Malaysia has not signed because the agreements are confidential.
Parliamentary questions
The press release comes just for answering parliamentary questions on the issue. CDA MP Pieter Omtzigt asked about the alleged non-disclosure agreement because messages about circulating on the Internet. According to those messages Malaysia would have refused to sign because the country disagreed on the secrecy issue.
According to the National Prosecutor the news of the agreement has now been made public, because the various countries would have a need for this. It is not clear what is the reason for this.
Omtzigt said in response to want to have in the inspection agreement: "I want to know whether the content hinders the investigation into the disaster, because that is ultimately the point." The MP further said it was "peculiar" that no mention was made of the agreement in the information that until now has been sent to Parliament. (red: they've kept it secret)
The information provided through the partnership that is published, will be used in the Netherlands, Australia and Ukraine in a criminal investigation. There is also a study in the Netherlands by the Safety Board."


emphasis mine.

Not Too Important's picture

The only answer is non-NATO/non-UN/non-RU peacekeepers - the Chinese. No one'll dare kill any of them. And the Muslims leave them alone.

Kirk2NCC1701's picture

Did you say "Peacekeeping"?  As I said on 8/6/2014 ( 5055309)...

If I were Putin, I'd start the PR campaign on Western Media and at the UN, that...

1. The UN must send in UN Blue Helmets, to avert humanitarian catastrophe and genocide (Ukrainians killing Russians in Ukraine), while also destroying Infrastructure and Mfg.

2. While maintaining and escalating (1), plan for inevitable "Russian Blue Helmets" (literally!) to step in, until the UN gets its act together and does what it is supposed to do.

3. #2 above gives Russia the Diplomatic Cover + PR Cover it will need, to prevent the US from escalating the conflict into a NATO/Russia conflict.  The US would dearly love to do this, to prevent (a) Europe from pivoting toward Asia, and (b) Delay/front-run the USD's demise as the GRC (given the escalating de-Dollarization). 

If the US were to succeed in its escalation, it is not the US that would lose.  Nor would Israel or KSA.  Rather, it is Europe, Russia and Ukraine who would lose, and the Eurasian alliance would stall.

8/29/14 p.s.:  They may wish to invite more neutral EU countries to join their Blue Helmet Peacekeepers, but not as part of NATO.  They might do this for PR (political cover) and other reasons (avoid escalation, keep ties to EU biz partners, since "The Spice Must Flow" between EU and Asia, and free EU from US-fascists).


gcjohns1971's picture

You do want an HONEST assessment, right?

Blue Helmet volunteers will be:

Turkey and Qatar - who want to expand their gas, and gas transport markets in Europe, and whose plans were frustrated by Russia's last invasion of a neighbor in 2008, but who benefit if Russia can't provide the needed gas to Europe.

Saudi Arabia and Sunni Iraq - who want to expand its gas and gas transport , and oil market in Europe - but who opposes Qatar from doing it, but who benefit if Russia can't provide the needed gas to Europe.

Azerbaijan, Turkmenistan, and Georgia - who want to expand their gas markets and gas transport to Europe, and whose plans were frustrated by Russia's last invasion of a neighbor in 2008, but who benefit if Russia can't provide the needed gas to Europe.

Iran, Iraq (shia part) - who want to expand their gas markets and gas transport to Europe, and whose plans were frustrated by Russia's last invasion of a neighbor in 2008, but who benefit if Russia can't provide the needed gas to Europe.

Libya, Algeria, Tunisia, Mali and Spain - who want to expand their gas markets and gas transport to Europe, and whose plans were frustrated by the chaos surrounding Khaddafi's overthrow, but who benefit if Russia can't provide the needed gas to Europe.

Bulgaria, Romania, Hungary - who want to diversify their gas supplies but are hindered by all the geopolitical intriques, and who benefit if Russia can't provide the needed gas to Europe.

Poland, Lithuania, Latvia, and Estonia will volunteer and work hard to see the situation stabilized- because a strong, independent Ukraine lessens their own chances of being the next country to be 'Ukrained' or 'Georgiaed'.

Germany and Austria - who will stabilize the Ukraine, and do their best to see the gas transport in Ukraine maintained, and who will make nice-nice with Russia while they buy up everything from Rostov-Na-Don to the gas fields, and then encourage those areas to become independent at the next sign of trouble from Russia.

France, Italy, Portugal - who will make a good initial effort, and then run home because their economies are collapsing.

The US and Britain - whose corporate cronies BP and Chevron own interests in all the competing plans, and who will make gestures and keeping things calm, while actually being quite sure to not be so effective as to make Russian gas through Ukraine seem like a viable gas supply option.

China - who will do something, but never enough to calm the situation, because the more in doubt Russian gas supplies to Europe, the more Russia depends on (and is vulnerable to) China.

And then the central American countries, Mexico, Guatemala, Belize, Honduras, El Salvador, Nicaragua - who have all gone to the US and will be wearing US uniforms.


Does that explain why the 'Chess Master' said that the UN was more difficult now than during the Cold War?

He's like Elmer Fudd, who built protective walls all around himself and belatedly realized he couldn't get out.

Kirk2NCC1701's picture

When you put it that way, I can only say... +1

+42, actually.  Given the significance of "42".  ;-)

Urban Redneck's picture

I don't think Putin wants to send CSTO peacekeepers into Ukraine, that would be Bush-league nation building, and far more risky than his apparently successful ground game.

UNSC is off the table because the two sides will never come to a consensus about whose thugs get to wear the blue helmets.

So that leaves the boys with a raging case blue balls in Brussels... who Putin needs to be able to cock block on a moments notice in case the get off their asses and decide to go looking for some Ukey asses to fuck.

Amish Hacker's picture

If Europe can't get gas deliveries via the Ukraine, they should have a Plan B, like, I dunno, maybe a pipeline that delivers Qatari gas through Syria? I'm surprised no one has thought of this.

Winston Churchill's picture

I hope they've got a C and D. They will need it.

Like Putin will ever let that happen, even though he has China.

Fucking Beduins, always blowing shit up.

Sandmann's picture

Europe will simply let Ukraine fold and it is Poland that will freeze not Germany

Not Too Important's picture

Putin does not want Chernobyl. That's a gift to the West that keeps on giving. A separate Novorossiya, brought into the Russian eco-bloc, and call it a day.

Mike Masr's picture

Fuck the Ukies, they are getting their nazi asses kicked by the DPR!