A bad situation

From Forbes….

The Russian energy company is poised to cut off the gas supply to Kiev as disagreements regarding debt repayment and pricing persist.

With negotiations between Russian energy company Gazprom and Ukraine at an impasse just a few hours before the firm’s midnight deadline, it looks increasingly likely that Kiev residents will start 2009 without supplies of gas. Gazprom engineers are prepared to make good on a threat to shut down the gas pipelines in the absence of an agreement.

Russia wants Ukraine to pay more for the gas, yet Ukraine can’t afford to pay the gas bill it has already. One can hardly blame the Russians in this case though. They need the money badly and they are still charging Ukraine below market rates.

Still, you can’t get blood out of stone. And Russia has no way of getting the gas to Europe except through Ukraine. But then Russia is not limited to playing nice. War?

Even if things don’t get that bad this time around, they are almost bound to before long. Ukraine is going to get increasingly desperate as time goes on. And the only bargaining chip they have is the pipe line.

For more on how ugly Ukraine’s position is, look at this post by Edward Hugh.

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