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Ukraine Calls Russia’s Bluff, Slashes Nat Gas Imports By 80% | Zero Hedge

Ukraine Calls Russia’s Bluff, Slashes Nat Gas Imports By 80% | Zero Hedge.

Twice in recent years, Russia has suspended gas supplies, or notably raised prices, as the somewhat well-known “trump card” of Russia’s oil and gas supply to Ukraine (and Europe for that matter) remains Putin’s easiest option for clenching his iron-first against the divided nation. Following a pre-emptive move in November by Ukraine to diversify its energy supply,  Russia had reduced the price of gas for the highly indebted Ukraine in December (to entice Ukraine under Russia’s wing); but, after recent events, Dmitry Medvedev signaled on Monday that the price could be raised again. However, today we find that Ukraine’s state oil and gas company, Naftogaz, has slashed gas imports from Russia’s Gazprom by  stunning 80% in February as Ukraine tries to show Russia it can’t be pushed around… of course, with limited (and more expensive) alternative supplies, we fear this could well shoot them in the foot.

This action is similar to that taken in November (before the EU accession discussion)…

 Russia and Ukraine waged two gas wars over prices in the winters of 2006 and 2009 (which lasted 3 weeks) over a claim Ukraine was late in paying.

Ukrainian Prime Minister Mykola Azarov said that if Gazprom refuses to revise its contract, Ukraine would stop importing gas from RussiaIn a step away from energy dependence on Russia, last week Ukraine signed a $10 billion shale gas deal with Chevron.

Ukraine is speeding up its effort to diversify its supply, and has looked at different exporters, fracking, new offshore projects in the Black Sea, as well as new LNG terminals and pipelines to diversify supply. Ukraine imports more than half of its gas from Russia, but under Viktor Yanukovich’s leadership, has intentionally scaled down Gazprom imports 40 percent over ‘unfair prices’.

And now today,

Ukraine’s state oil and gas company, Naftogaz, has slashed gas imports from Russia’s Gazprom to 28 million cubic meters per day as of February 24 from 147 million, two Russian industry sources told Reuters on Tuesday.

They said Naftogaz had gradually reduced its imports from 147 million cubic meters as of February 1, but did not offer a reason for the cuts.

Prime Minister Dmitry Medvedev hinted on Monday that gas prices, reduced as part of a Russian bailout in December, may revert to higher levels.

Ukraine consumes about 55 billion cubic meters of gas each year, and more than half is imported from Russia. Gazprom exported 161.5 billion cubic meters of gas to Europe last year.

Gazprom official declined to comment on Naftogaz import volumes but said Russian gas transit to Europe was unaffected.

So simply put, they want to show Russia they can’t be pushed around… the trouble is, of course, that with alternative supply routes in short-supply (and only more expensive alternatives available)…

…they may well be shooting themselves in the foot. That and the whole being out of money thing too won’t help.  Finally, as everyone knows by now, Russia does have the “trump card” no matter how hard to get the Ukraine plays:

Angela Merkel Furious At Nuland’s “Fuck The EU” Comments | Zero Hedge

Angela Merkel Furious At Nuland’s “Fuck The EU” Comments | Zero Hedge.

A few short months after Putin cornered the US state department into a disastrous foreign relations dead end with the false flag Syrian escalation which achieved none of the predetermined nat-gas-to-Europe pipeline ambitions, instead alieanting the US from both staunch allies Saudi Arabia and Israel, the Russian president has just managed to inflict yet more pain on US foreign policy this time by infuriating (even more) a core US ally in Europe – Angela Merkel. Just two days after the phone recording of Victoria Nuland emerged in which she not only made it explicitly clear it was the US who was the puppetmaster behind the Ukranian opposition with the traditional CIA tractics as was expected all along, but also explained just how the US freels toward the EU with the now infamous “Fuck the EU” comment, Angela Merkel called the obscene remark “absolutely unacceptable.”

And then, Nuland not knowing when to stop, proceeded to insert foot in mouth just a little deeper: “”I am not going to comment on private diplomatic conversations. But it was pretty impressive tradecraft. The audio was extremely clear,” she told reporters during a visit to Kiev.”

At least she indirectly complemented Putin on being smart enough to not only intercept what appears to have been an unencrypted phone call, but to release it at just the right time as the entire world’s attention turns to Russia and by extension, the Ukraine.

Because in retrospect Putin does deserve praise: having won the Ukraine over Europe’s cries of horror, he has also managed, in the past year, to alienate the US from Israel, Saudi Arabia and now, Germany. And all this without saying a single word, let along firing a shot.

So now that we know the apriori winner, the loser has no choice but to engage major damage control, which is borderline delusional. From Reuters:

[Nuland] said she did not foresee damage to relations with opposition leaders, saying they “know exactly where we stand in respect of a non-violent solution to the problem.”

 

Of relations with Russia, she said Washington and Moscow had “very deep, very broad and complex” discussions on a range of international issues including Iran and “frank and comradely discussions” on Ukraine.

 

U.S. officials did not deny the authenticity of the recording and said Nuland apologized to EU colleagues for the comment.

 

Angela Merkel, already furious with Washington for several months over reports that U.S. officials bugged her own phone, found Nuland’s remarks “totally unacceptable”, a spokeswoman for the German chancellor said.

Yet, it’s one thing to delude oneself that the US is still the undisputed world’s superpower, it is far worse to express the kind of hubris that Nuland did, when she communicated and discussedconfidential US geopolitical strategy on an unencrypted phone line – traditionally a fireable offense, if not worse.

In Washington, U.S. officials said Nuland and Pyatt apparently used unencrypted cellphones, which are easy to monitor. The officials said smart phones issued to State Department officials had data encryption but not voice encryption.

 

In Nuland’s call, apparently recorded about 12 days ago when Ukrainian opposition leaders were considering an offer from Yanukovich to join his cabinet, she suggested that one of three leading figures might accept a post but two others should stay out. In the end, all three rejected the offer.

The biggest loser here, however, continues to be the Ukraine, whose people are facing a cold winter without assurances they will have Russian nat gas, and a government that is a chess piece in an ongoing power play between Europe and Russia, now that the CIA has taken a back seat. Incidentally, Russia made it quite clear that it demands Ukraine’s full allegiance and as Russian finance minister Anton Siluanov told reporters overnight, Russia  would withold its second loan payment to the troubled nation unless the Ukraine, which owes a “not insignificant” sum for natgas, makes the payment.

In other words, just like Greece has become a money “tolling” intermediary for the ECB and German banks, in which Europe pretends to bail out the crushed country when in reality it is just funding debt payments to its own banks, so the Ukraine has now become an intermediary, in which loan payments from Russia go to pay… Russia’s Gazprom. And in the process Russia pulls the Ukraine from the European sphere of influence and back into that of the New Normal USSR.

Game, set, match Putin. Again.

But wait, there’s more. Because Putin, unsatisfied with simple making a mockery of the US State Department, decided to rub it in some more. The Hill reports:

Rising animosity between the former Cold War powers was on full display Friday when Russia chose a former figure skater who tweeted out a racially charged picture of President Obama for the symbolic lighting of the Olympic cauldron.

 

Russian President Vladimir Putin hoped hosting the first Games since the 1980 Moscow Olympics, which the U.S. boycotted, would showcase a “new Russia” emerging from the ashes of the Soviet Union as he enters his 15th year in power.

 

Instead the U.S. and its western allies have consistently painted the picture of a corrupt autocracy.

 

The media’s focus on the persecution of gays in Russia, terrorism and Russia’s lackluster infrastructure – many hotels don’t have potable water even though the Games are estimated to have cost more than $50 billion, the most ever – have further infuriated the Kremlin.

 

“I understand how the press here works. They need hot issues in order to be read, to have high circulation,” Sergey Kislyak, Putin’s envoy to Washington, told The Washington Diplomat last month.

That’s ok – as long as the US population can keep itself distracted from the sheer implosion of US standing internationally by looking at tweeted images of decrepit toilets and busted Sochi plumbing from a self-indulgent US press corps, and continue feeling good about itself, then all is well. After all, that’s just what Putin wants.

Consumers Paying More as Nat Gas Cash Prices Spike

Consumers Paying More as Nat Gas Cash Prices Spike.

By Joao Peixe | Thu, 06 February 2014 22:43 | 0

As natural gas prices climb, reaching over $5/mcf again on 4 February, and with an unseasonably cold winter, local utilities say that natural gas customers’ bills are 30-40% higher now than last winter.

Last week, we saw natural gas prices rise above $5 for the first time in three years, then falling back a bit only to rise again on 4 February, with March futures trading above $5.25/mcf—or more than 6%, according to expert trader Dan Dicker.

Customers are footing the bill for higher gas prices and the coldest November-January period in four years in the Midwest and Northeast.

In Omaha, Nebraska, weather has been about 30% colder this year than last, and utility regulatory officials saying that gas use among customers is up while bills are up by 34-38% over last year.

Utilities are paying high prices for gas because demand has been higher and consumption rates at a level that has reduced storage by about 17% over the average of the previous five years.

In the meantime, there is a great deal of disconnect between cash prices and futures prices for natural gas, with futures trading an increasingly volatile business. While 6 February saw a spike in next-day prices, according to Reuters, 5 February saw natural gas futures fall sharply due to longer-term mild weather forecasts.

“The futures market appears to be disconnected from key developments occurring in the physical market,” Reuters quoted BNP Paribas analyst Teri Viswanath as saying on 6 February. “Today we witnessed a marked increase in spot prices for every consuming region, suggesting that utilities might be rationing limited inventories by purchasing gas off the market.”

As Dicker noted for The Street, “Low stockpiles caused by sequestration and a rush of domestic exploration and production companies away from natural gas production in favor of shale oil is taking its toll and providing the first real and consistent support of prices since 2007. Suddenly, natural gas markets are vulnerable to price spikes and traders are afraid to be short.”

By. Joao Peixe of Oilprice.com

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