What's Going on with The Ukraine?

I've been watching this story develop over the weekend and it isn't getting much attention here, what with the Mid East situation and our local US ongoing political soap opera (Blagojovetch, CIA director, Franken V Coleman, etc) but in my usual paranoid way I find it rather worrying.

Ukraine Accused of Stealing Gas

And today:

No Progress in Europe Gas Talks

Is this shaping up to be another Georgia, even if only economically? Or is Ukraine really in the wrong and Russia's actions justifiable?

EDIT: A bit disorganised points, but this is the impression from the Swedish horizon.

It is really hard to tell exactly what is going on as there is a big blame game going on. The reduced exports will start to hurt people in up to 20 European countries pretty soon though.

It gets attention here due to our traditional Russophobia, and probably gets significant attention in a central Europe that relies on gas through that pipeline for heating in a darn cold winter (damn I'm glad we rely on nuclear and hydro for power and local stuff for heating).

From past experience I'd assume both are in the wrong. Ukraine for siphoning off gas and not paying old bills (though the size of the debt is a matter of argument between the two), Russia for using gas as a political weapon against a Ukrainian government it dislikes.

It shouldnt turn into another Georgia. All sides have an incentive to resolve this crap pretty quickly. Both Russia and Ukraine sent reps to the EU to present their picture of the case. Russia needs European gas money and is somewhat dependent on keeping at least Germany and Italy happy (both are affected by the decreased gas flow and not very happy), Ukraine needs European investment, and Europe needs heating or people will start dying soon. Some of the countries affected are pretty poor (Bulgaria and Romania for instance) and some (again Bulgaria, possibly Serbia, Italy, and Germany) might rethink their traditionally pro-Russian stance.

I've also seen rumours that underpressurised pipelines are breaking down, which would hurt future exports and there isnt really any other route as the planned Baltic and Black sea pipelines are a few years off (and some not so pro-Russian countries with waters on the way might throw an extra spanner in the works for those two now).

It might also speed up the building of a pipeline from gas-rich central Asia through Azerbadjan and the unstable Caucasus, circumventing Russian and Ukraine altogether, which isnt really in Russias interest.

In all I think that common sense should prevail in a week or so, this situation is really hurting everyone involved.

EDIT2: I get the impression Russia cut gas supply to such an extent that Gazprom is breaching it's contract with western (e g anything west of the Ukraine) customers, I'd expect some stink around that and reparations of some sort once the immediate crisis is resolved.

Nope, it won't be another Georgia. This is a recurring tragi-comedy caused by a messy snarl of conflicting interests and interest groups.

First, natural gas is an unusual commodity, because it's delivered by pipeline and can't be effectively transported far from those lines. That means that both the buyer and the seller are in a monopoly position -- if the buyer won't buy the seller will find it hard to sell the gas elsewhere, and if the seller won't sell, the buyer won't be able to buy it elsewhere either. This means that gas prices are not set by competitive markets, but by bilateral negotiations between the seller and the buyer. This process looks a lot like a game of chicken.

Second, Russia has been selling gas to Ukraine for much less than it charges for EU countries, for a number of reasons: because Ukraine is dirt poor and can't afford to pay more, and because the pipeline runs through Ukraine and Ukraine can just steal gas destined for Europe. So, Ukraine can deny Russia profits from the more expensive gas going to Europe, and Russia can deny Ukraine the gas it desperately needs.

So what we're seeing here is a round in that game of chicken. It obviously always happens in early winter, because that's when Ukraine and Europe need the gas most; Russia threatening to cut off supplies in July wouldn't cause much of a row.

A salient point is that the Russia/Ukraine gas deal is renegotiated every year.

So, what happened just now was that Russia wanted to hike the price of gas for Ukraine by a fairly hefty amount in the 2009 contract (still leaving it much below what it charges Europe). Ukraine said "No." Russia said "OK, we'll cut the supplies then." Ukraine said "Try me." Russia did, and now Ukraine, Turkey, Bulgaria, Romania, Hungary, and Greece are out of gas. Now it's a matter of waiting to see who blinks first.

Now, another question is *why* Russia wanted to raise the price of gas just now, and why it didn't blink yet. There are a number of reasons for it.

The obvious one is that the fall in oil price has left a huge hole in the Russian budget, which they're looking to patch in any way possible: raising the price of gas that you know your customers need and can't get anywhere else looks like a bit of a no-brainer from that point of view.

There are other, less straightforward ones too. Putin and Medvedev have no love lost with the Ukrainian prez, Yushchenko, ever since he won out over Kremlin's man Yanukovych, back when there was all that fuss about the orange flags and stuff. Now, it appears that the PM, the blonde lady with the Princess Leia hairdo, Yuliya Tymoshenko, may be attempting a power play against him, and there's suspicion that she's cut a deal with the Kremlin about this: the Russians make the Ukrainians freeze for a while, they get upset at the Prez, Tymoshenko steps in, and magically the gas starts flowing again: everybody's happy, except Yushchenko, of course. (The thing to keep in mind is that Ukraine is incredibly corrupt; these guys are all crooks, and some of them are actual murderers.)

Yet another point is that Russia wants to build another gas pipeline in the Baltic Sea. The Germans are for it, but many other EU countries are against it. So, if Russia can make the Ukrainian pipeline look like a bad risk, they're hoping to turn around the opposing EU countries so the Baltic Sea pipeline can go ahead. (I'll be damned if I understand how a pipeline in the Baltic Sea will help get gas to Greece, though.)

So, it's basically a bunch of regularly recurring arm-twisting based on money, power, and people cordially despising each other. However, I'm really not too worried about this spinning out of control. Russia has its hands full with its own problems right now, and isn't about to get into a serious scrap with Ukraine; Ukraine is behaving like Ukraine usually does, and the folks in Southern Europe will have to wear a few more sweaters for a while. The Ukrainians will have a very unpleasant winter, but then again they usually do. I'd expect it to sort itself out in a couple more weeks.

AFAIK neither of the planned future pipelines will have enough capacity to replace the ukrainian ones completely. The Baltic one, "North Stream", isnt the only projected pipeline, there is also a "South Stream" through the Black Sea in the works. I really dont see how the situation could improve relations with the hostiles, Russia's main "enemy" within the union, Poland, gets most of it's gas through the Belarus pipeline and isnt hurt nearly as badly as the Balkans by this. And treating loyal Belarus like this would hurt Russian soft power pretty badly. It is more likely that Poland and other russophobes within the union will argue even louder for a common energy policy that reduces reliance on natural gas.

I also doubt the demanded price increase is to replace oil revenue in the short term though, prices vs the rest of Europe are more stable. Rather it is part of a plan and shattered deal to gradually increase Ukraine's price to European rate (Belarus will also see such an increase and it has created some tension), so the proposed increase is not a surprise. The argument over the size of old unpaid bills seem more infected.

Interestingly both Ukraine and Belarus offer discount transit rates for pipelines on their soil, and the Belarus pipeline is even owned by Gazprom, so one might expect some sort of solution including raised gas price and raised transit fees through Ukraine, that could possibly resolve the situation with limited loss of face...

EDIT: Apparently the head of Gazprom stated that deliveries to Europe will be resumed once independent (probably EU?) inspectors are in place to monitor the pipeline and eventual Ukrainian siphoning.

Oh, by the way, magerette -- there's a little distinction of nomenclature you might want to be aware of. Ukrainians are very particular about having the country called Ukraine, not the Ukraine.

The reason is that "the Ukraine" carries a connotation of a geographic territory without political or national identity, whereas "Ukraine" has all the pomp and circumstance of a nation-state. Also, the former was regularly used by people who considered the Ukraine an organic part of Russia, and referred to Ukrainians as Little Russians (as opposed to White Russians or, of course, Great Russians), whereas the latter is used by people who are adamant that Ukraine is a "natural" nation-state just like Poland or Russia. Ukraine is derived from "borderland," "u kraine" is literally Russian for "along the border." Just so you know...

So thats where the name Krajina comes from, never thought about that

Well, Serbia has no gas. Doesn't impact me directly, but some of the, uhm.. electranes? used for central heating don't have the option of switching to alternative fuel sources (meaning, mazut), and needless to say, there's no gas for the households who use it (mostly in Vojvodina). Which all leads to funny stories such as a hospital asking patients to go home, because they can't heat the hospital; those that can't be moved are encouraged to get their familiar to bring an electric heater to the hospital. Only in Serbia, hm?

Anyway, there have been negotiations with Hungary, and I now see they've come to an agreement (Hungary will send us about ~1-2 out of 10 millions of cubic meters we need, more info here (in english)).

Well, that's how it is over here, on the off chance someone is interested.

Been seeing pictures of folks freezing in Romania, VPeric, but nothing much from Serbia so thanks for the update.

As always, you guys have explained things I never even thought about about all this and I thank you for filling me in. This adds to the picture of how the world energy situation is all enmeshed and global interaction/cooperation is vitally important.

And I apologize to any Ukrainians for not referring correctly to their nation. (Thnx Prime J, for the heads up.)'The Ukraine' does indeed sound more like a region than a country. You know how we Americans are, so please excuse me.

They use natural gas to run the pumps on the pipeline. They're also arguing over who should pay for that process loss. The Russians say the Ukrainians should pay for that usage (the extra gas does go in the Russian end of the pipe) while the Ukrainians figure it's not their damn pumps. That's a component of the "siphoning" everyone's arguing about. It's not all shady guys attaching a hose to the side of the pipeline (although I expect there's a fair bit of that going on that the Ukrainians are trying to hide in the pump usage).

Not the most pro-Russian source, but at least a seemingly level-headed comment by former deputy minister of energy Milov: http://www.rferl.org/content/Interview_Gazprom_Harms_Russian_Interests_/1367968.html

The situation is very confusing at the moment.

Sunday: Everyone claims to have signed the agreement.
Monday: Russia says the terms to switch on the gas arent fulfilled, says they are, no they are not. The idiots should have sorted this out during Sunday's discussions. Things however seem to be resolved late on Monday.
Tuesday: Russia switches on the gas, but now it is Ukraines turn to make difficulties, ending with a complete block of transit. Apparently Ukraine is unhappy with the terms of transfer. The idiots should have sorted this out during Sunday's discussions.
Wednesday: In an unusually blunt statement the chairman of the EU commission says that the member states should take our problematic Eastern friends to court (was already on the table, this shit isnt force majeure), and more importantly that Europe jointly should start to look for other sources of energy. This later point has been pushed by Poland and the anti-Russian members for years.

Once again I am glad that we still have nuclear and hydro power to cater to fill our domestic demand, and I do hope we finally make a move towards a common energy policy and a lift of the (stupid and domestic) ban on new Swedish nuclear plants...

Hear hear. We don't have an actual ban on nuclear power (building a new plant right now, as a matter of fact), but the policy is still bone-headed -- for years we've been avoiding building nukes; instead, we buy electricity from Russia instead. Where, of course, it's generated in the Sosnovyi Bor nuclear power plant just on our doorstep, which is, naturally, much, MUCH safer and more environmentally friendly than the ones we run. And yeah, we do import a lot of natural gas from Russia as well.

But for grown-ups, these guys sure are behaving childishly.

I always thought grown ups were large versions of babies, so no surprise there.

Prime Junta said:

Hear hear. We don't have an actual ban on nuclear power (building a new plant right now, as a matter of fact), but the policy is still bone-headed -- for years we've been avoiding building nukes; instead, we buy electricity from Russia instead. Where, of course, it's generated in the Sosnovyi Bor nuclear power plant just on our doorstep, which is, naturally, much, MUCH safer and more environmentally friendly than the ones we run. And yeah, we do import a lot of natural gas from Russia as well.

Click to expand...

Our red-green opposition is officially pledged to closing down our nuclear power, but the process has been stalled for a very long time (only the smallest power plant in Barsebäck has been closed down, and I guess that made some sense as the plant was close to Copenhagen and the Danes didnt like that).

Around 1980 we had a referendum with three (!) extremely clear options:

A) Abolish nuclear power!
B) Abolish nuclear power when reasonable!
C) Keep nuclear power.

B won a plurality in what must be among the worst designed referenda ever, and the parliament decided to interprete this as "let us close down all our nuclear power plants by 2010".

The "banners" wont acknowledge that closing down 50% of our energy production would force us to replace the energy with either domestic natural gas plants (running on Russian gas), imported Finnish/Russian nuclear power (yeah lets move the nuclear "threat"), or the currently fairly dirty technology of Danish coal power

I dont see us closing down any plants within the coming decade or so, but we have some political deadlocks to break before we will build any new ones. Hydropower that counts for 45% of our electricity production cant be expanded much either as the large rivers in the far north are protected by environmental regulation, and there are practical limitations to how much wind energy one can put in the mix (solar is not even an option for anything but low grade heating of water this far north).

O a discussion about swedish power supply that's sweet.

First of all Zaleukos, there are the so called environmental houses, with very good isolation that uses the heat produced by humans, lamps, computers etc and preserve it without using any electric supply, in case the temprature drops too low, some electricity will automatically be used. But these houses has a much lower consumptation, I think it will be a great option for the future. We also have a solar powered house, were the solar power is also used for lamps etc etc. Your private villa can also be powered by solar panels, and the electricity sold to your neighbours since a new style solar panel produce more power than needed for a small villa. In the northmost part of sweden, it is probably not an option though. The problem with the solar power is the cost, and the materials used in the high performing thin film solar panels which has toxic waste we don't know how to get rid of, and can cause serious problem if leaked into the environment.


As far as nuclear power goes, I have very mixed feelings about this, first of all if the world would rely much more on nuclear power, it would mean that sooner or later there'll be an accident, even if the % chance is very small, the more you build the bigger the chance. Secondly the technology can be used to create weapons of mass destruction, and we still do not know how to store the nuclear waste in the best way. On top of that we have natural disasters, imagine if the epi center in a chinese earthquake was near the nuclear plants. That could get very nasty. That's a big reason why I think china betting big on nuclear power is not such a hot idea!

I am quite happy sweden is not increasing its nuclear power, but on the other hand coal power or buying nuclear power from another country is not much better.

But that is the swedish thinking I guess, we are far enough from the nuclear power to not get a big bang unless it happens in sweden.

@GG, everything's relative. Sure, nuclear waste is a problem, but then so is CO2 (from coal, oil, or natural gas), dams and long power lines (hydroelectric), or the environmental impact of constructing and transporting solar panels or wind turbines.

Nuclear accidents are a risk, but so are mine collapses, deaths from particulate pollution, disasters from transporting chemical fuels, and so on. There isn't enough hydroelectric potential to produce all the electricity we need, and it'll be a long, long time before we have enough solar and wind power to produce more than a small fraction of what we need.

Same thing with conservation -- I totally agree with you that there's a lot of room for improvement there, and that's the obvious place for it. But, again, it's just a small piece of the puzzle.

As to the proliferation risk, I believe that the risk of nuclear technology being diverted to military uses from plants run in Sweden or Finland is so tiny that we can safely ignore it.

Finally, to put things into perspective: if all the electricity you used in your life was produced by nuclear power, the resulting waste would fit into a beer can. It would be rather nasty waste, to be sure, but compared to the waste created by burning coal, oil, or natural gas, it's pretty damn easy to handle.

Nuclear power isn't THE answer, but it is AN answer. In the medium term, I don't see how we'll be able to do without. In the long term, there will probably be better alternatives, but as Keynes said, in the long run, we're all...

House heating is not much of an issue today. Sweden doesnt use much electricity for heating any more (those who like my parents had electric heating have mostly installed modern heat exchange systems that use a fraction of the energy of an electric radiator), so that really isnt part of the equation. We use electricity for industry, lighting, and the railway system that the environmentalists are such big fans of (and which is a good idea up to a point, there are ceilings for how much you can rely on rail).

You are right in that it is quite possible to build a house that uses solar power for heating and hot water needs even in Sweden (solar panels on the roof heat up water that can act as an energy reserve, but this only works because slow heating of water doesnt require that much power. But solar is pretty useless for electricity production this far north as we dont have sunlight during the hours we need electricity the most (and often not during the day either) and storing electricity is somewhat tricky

A nuclear plant hit by a Chinese earthquake would of course release a lot of highly toxic material, but I doubt the scale is much different from what would happen if a mine (remember the Boliden mining dam incident in Spain a few years ago?) or a chemical industry suffered from the same.

Thanks guys, I am always impressed by your knowledge and your great skills at having a good discussion!

As to the proliferation risk, I believe that the risk of nuclear technology being diverted to military uses from plants run in Sweden or Finland is so tiny that we can safely ignore it.

Click to expand...

Indeed, this was on a global account, not targeted at sweden and Finland.

Nuclear accidents are a risk, but so are mine collapses, deaths from particulate pollution, disasters from transporting chemical fuels, and so on.

Click to expand...

A nuclear plant hit by a Chinese earthquake would of course release a lot of highly toxic material,

Click to expand...

Well if you look at tjernobyl, people are still affected by the accident there and born with strange disease's, even if the immidiete impact of a mine collapsing could be quite serious the effect of the nuclear accident lasts much longer, and have very hard to determine effects on human life for generations to come.

You are right in that it is quite possible to build a house that uses solar power for heating and hot water needs even in Sweden (solar panels on the roof heat up water that can act as an energy reserve, but this only works because slow heating of water doesnt require that much power. But solar is pretty useless for electricity production this far north as we dont have sunlight during the hours we need electricity the most (and often not during the day either) and storing electricity is somewhat tricky

Click to expand...

The technology is moving forward quickly, according to my professour at the course in university, we already have the technology to provide the entire world by solar power ( Could be he was overly optimistic though, but he is famous in this field! ), however the costs and the thin film problem does not currently make it a viable option. There is much more technology than the simple warming water one, and things keeping moving forward in the field. I just hope more countries would invest much more in it!

As far as the lighting go I am curious what the impact will be of banning none environmental friendly lamps. Some people said it will not have a big effect since these lamps produce heat, but this heat is not always necesarry all year around, especially not in summer, and as we already concluded we have great ways to produce heat in a very low energy consuming way!

All in a all, if we could reduce the power consumption by more effective technology we might not need all that nuclear power.

Interesting topic. To begin with I sure also am glad we don't depend on Russia for energy, and I agree completely with what Zaleukos said, Hopefully we'll expand our nuclear power capacity in the future (2-3 elections away I'd guess).

The biggest problem is really what we're seeing with the new Finnish reactor: Massive delays and budget overshoots with a design made out to be much quicker to construct than the generation of reactors active in Sweden today. I worked at the Swedish nuclear education company (KSU) this summer and got some insiders' looks at it all. Also some American designs (ESBWR, AP1000) look more promising than the European EPR, but I really didn't get enough info about any of them to form more than a quite uninformed opinion.

GothicGothicness said:

Well if you look at tjernobyl, people are still affected by the accident there and born with strange disease's, even if the immidiete impact of a mine collapsing could be quite serious the effect of the nuclear accident lasts much longer, and have very hard to determine effects on human life for generations to come.

Click to expand...

True; Chernobyl was a horrendous disaster. But:

(1) The Chernobyl plant -- like most of the ones from that time in the former SU -- was an inherently unsafe design. The pressured-water reactors in use in the West are inherently much safer, and the latest-generation ones coming into use now are much safer still. The ones being currently designed -- such as pebble-bed -- are stable at the lowest level; there's simply no way at all you can get a mass of fissile material together that would cause a reaction spin out of control.

(2) The immediate cause of the accident was a complete breakdown in operational procedures: you couldn't do any better if you tried to melt down one of those on purpose. All automatic failsafes were manually disabled, and then a completely looney manual shut-down procedure was attempted. IOW, the accident was entirely preventable.

(3) The Chernobyl disaster is the *only* accident involving nuclear power and causing massive loss of life and environmental destruction, in a half-century of use. This pales into insignificance compared to the environmental impact of coal, oil, or even natural gas over the same time period -- or, hell, even hydropower, consider the Three Gorges dam in China or the Aswan dam in Egypt.

(4) As to the long-term impact on humanity and the environment, I have two words for you:

Climate change.

If half of the scientific consensus on that is true, the world would be better off with one Chernobyl a year than with what we're getting by burning coal and oil.

The technology is moving forward quickly, according to my professour at the course in university, we already have the technology to provide the entire world by solar power ( Could be he was overly optimistic though, but he is famous in this field! ), however the costs and the thin film problem does not currently make it a viable option. There is much more technology than the simple warming water one, and things keeping moving forward in the field. I just hope more countries would invest much more in it!

Click to expand...

I agree. My brute-force solution to the energy issue would be to simply fill the Sahara with solar-electric panels, run high-tension lines to the coasts, use the electricity to produce hydrogen, and ship that all over the world. Problem solved.

As far as the lighting go I am curious what the impact will be of banning none environmental friendly lamps. Some people said it will not have a big effect since these lamps produce heat, but this heat is not always necesarry all year around, especially not in summer, and as we already concluded we have great ways to produce heat in a very low energy consuming way!

Click to expand...

It'll have a pretty small effect. The energy cost of *producing* those lamps (and disposing of them when they die) is quite high, and offsets a lot of the power saved.

All in a all, if we could reduce the power consumption by more effective technology we might not need all that nuclear power.

Click to expand...

I would much rather get rid of coal and oil first; nuclear is pretty benign compared to them.