Russia Cuts Gas Supply to Ukraine Russia cuts off gas deliveries to Ukraine after Ukraine refuses to pay sharp increases in gas prices. I find this interesting for several reasons.

First, the attempt to raise prices flies in the face of worldwide prices. There simply isn't a reason, based on supply and demand, to do so. However, the Russians apparently felt they could strong arm the locals into paying increased prices to make up for the shortfall in sales they can't make elsewhere. It isn't working.

Plagued by the sharp fall in oil prices, Russia has been scrambling to make up the revenue shortfall as prices have slipped below $40 a barrel. Gazprom, too, is heavily in debt and sinking along with the energy market.

Next, the eastern European countries seem pretty much on the same page in rejecting the Russian demands (and let's face facts, Gazprom is the Russian government). These countries have long resented Russian domination that Putin wants to continue.

The shutoff at the peak of the heating season carried more than financial overtones; it is the most confrontational move by Russia toward a neighboring country since the August war in Georgia.

In comments broadcast Wednesday evening on Russian state television, Putin said any interference with Russia's gas exports to Europe would carry "serious consequences for the transit country itself." He did not elaborate, but Ukrainian officials did not need to be reminded that Russia issued a series of threats and provocations against Georgia, leading in part to the war last summer.

Underlying the gas dispute are long-running tensions between Russia and Ukraine, a former Soviet republic of 46 million. In 2004, after the street protests known as the Orange Revolution led to the installation of a pro-Western government in Ukraine, talks over gas supply and its transit became strained. This time, however, the political coloring is less clear.

But one telling comment says it all about the current state of affairs that the Russians just don't understand.

"On the Russian side, they are eager to raise cash," he said. "And on the Ukrainian side, they have difficulty finding it."

You can't get blood from a turnip Mr. Putin.

Labels: International

  ¶ posted by Hobie 11:39 AM