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Gas Warfare, 21st Century Style

5:02 PM, May 21, 2014 • By GEOFFREY NORMAN
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It is an uncomfortable fact that several European countries depend on Russia for energy and the situation in Ukraine has jeopardized that arrangement. Today, as Vanessa Mock of the Wall Street Journal reports:

The European Union urged Russia on Wednesday not to disrupt gas flows to Ukraine, just 10 days ahead of a Moscow-imposed deadline to resolve a pricing dispute over natural gas between Kiev and Moscow.

Seems the Russian gas behemoth, Gazprom, wants money that it believes it is owed by Ukraine and:

... has warned that continued nonpayment would result in a cut in gas flows for Ukraine, which could affect EU countries, given that Ukraine serves as the main transit route for Russian natural gas deliveries to the Continent. Kiev and Moscow have been deadlocked over gas prices since the ouster of Ukraine's former President Viktor Yanukovych, a Russian ally, in February.

Any progress hinges on agreeing future gas rates, after Kiev rejected a price increase that Gazprom imposed in April, when it ramped up rates from $286 per billion cubic meters to $485 per bcm. 

Leading one to wonder just who will feel the pain of economic sanctions as the crisis continues.

Meanwhile, Russia is behaving as though it believes there is a buyers market for gas and it does not need Europe. As Alexei Anishchuk of Reuters reports:

China and Russia signed a $400-billion gas supply deal on Wednesday, securing the world's top energy user a major source of cleaner fuel and opening up a new market for Moscow as it risks losing European customers over the Ukraine crisis.

The long-awaited agreement is a political triumph for Russian President Vladimir Putin, who is courting partners in Asia as those in Europe and the United States seek to isolate him over Moscow's annexation of the Crimean peninsula. 

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