From Reuters……

New efforts to break the deadlock between Russia and Ukraine and restore gas supplies to freezing European countries were planned on Friday, with the intervention in the dispute of a consortium of energy firms.

Paolo Scaroni, chief executive of Italian energy giant Eni SpA (ENI.MI) said late on Thursday the consortium would provide gas necessary for technical reasons to get pipelines and pumping stations working again.

The move could allow gas supplies to Europe to get under way immediately, leaving the question of reimbursement for the consortium’s gas on hold until an agreement between Ukraine and Russia on their price dispute is reached.

Meanwhile, an official from Gazprom explains their point of view on the Wall Street Journal.

From Calculated Risk comes a pretty graph showing how badly retailed sales collapsed in December.

Meanwhile, the Telegraph reports….

The OECD’s gauge of “Leading Indicators” – which gives warning of trend changes a few months in advance – shows an abrupt rupture in Asia and among commodity producers, with the most damage surfacing in countries with an export surplus that depend on sending goods abroad.

The index for Russia has seen the sharpest slide, falling 4.3 in November, China fell 3.1 and Germany was down 2.0, the worst performer in the G5 bloc for the third month in a row.

In other words, the worlds biggest net exporters are being hammered. You would think that at least the Gulf States would be setting pretty. After all, oil prices were sky high for most of last year. But Brad Setser says….

– The capital losses on the Gulf’s existing portfolio overwhelmed large inflows from high oil prices in 2008. Close to $300 billion flowed into the big Gulf funds — the Abu Dhabi Investment Authority/ Abu Dhabi Investment Council, the Kuwait Investment Authority, the Qatar Investment Authority and the Saudi Arabian Monetary Agency’s foreign assets. But the market value of their Gulf’s foreign portfolio fell by an estimated $350 billion over the course of 2008. Throw in a roughly $30b fall in the Gulf’s reserves as hot money betting on a revaluation left and the total value of the Gulf’s external assets likely went down over the course of 2008.

From the Free Press….

Another of the nation’s leading credit rating agencies has downgraded the City of Detroit’s credit rating to junk bond status, Mayor Ken Cockrel Jr. said today.
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The announcement by Moody’s follows Standard & Poor’s assignment of junk bond status to the city’s debt last week. The downgrade to junk bond status allows certain investors to claim a payout from the city totaling $400 million, an amount that could force the city into bankruptcy.

So far, no investors have requested the money from the city, according to the advisory from Moody’s.

Moody’s downgraded Detroit’s debt to Ba2 from Baa3 and to Ba3 from Ba1. It attributed the downgrade to the city’s $300-million budget deficit, delays in producing a required annual audit and the declining local economy.

This is why rating agencies are a joke. Any sane person knew that the city of Detroit’s debt was junk a long time ago.

From the Guardian…..

Despite an EU-brokered agreement on Monday to allow outside monitors to verify the gas flows and get the gas pumping immediately, the Russians continued to supply insufficient gas to power the system through to Europe yesterday while the Ukrainians also kept some pipelines closed, Brussels said.

“We opened the tap, and are ready to supply gas, but on the other side, the tap is closed,” said Vladimir Putin, the Russian prime minister.

But according to Brussels, the Russians were pumping less than a third of the volume of gas needed to supply Europe and deliberately entered it into the wrong pipeline across Ukraine. “If the agreement is not honoured, it means that Russia and Ukraine can no longer be considered reliable partners for the EU in matters of energy supply,” warned Barroso.

Despite the tough talk, the Europeans have little leverage over the Russians in the short term. Barroso was said to have had a “robust” conversation with Vladimir Putin, the Russian prime minister, by telephone. “This is getting close to breaking point,” said a commission official. “There is a feeling that Putin is being duplicitous, to put it mildly.”

This is all very confusing. But if I am making sense of this all, Ukraine is keeping some pipelines shut is due to the fact that they can’t get enough gas to run their entire pipeline net work all at once. Thus, they have to make a choice about which pipelines to open up and which ones to keep closed. And Russia is deliberately making it impossible for them to do this.

But various newspapers determination to be even handed is making it difficult to make sense of it all. Why is it so hard for the Guardian to spell out in plain English why Ukraine is keeping some pipelines shut?

On the plus side, Russia should be commended for teaching Europe the importance of energy security. It is a lesson that they have long needed to learn.

From the Telegraph….

EU sources told The Daily Telegraph that the crisis is expected to escalate on Wednesday as European patience runs out with Russia.

Russia has “done everything it can to damage the Ukraine’s credibility as a transit country”, said the source.

According to EU monitors sent to check pipelines in Ukraine and Russia, the Russians resumed supply only to then deliberately channel gas via difficult routes and at insufficient pressure to guarantee supplies to Europe.

Officials close to negotiations have also reported that Russia has tried to physically block EU monitors, sent to both countries to monitor gas flows.

“Russia played a trick by saying it would resume supply. Russia set this up to convince everyone it is the Ukraine’s fault not their own,” said a European source.

So far so good right? But Spiegel is telling a different story…..

But before the supplies could even get to the EU, the pipelines were reportedly shut down again. European Union observers in place to monitor gas flows said they had measured “little or no gas” in Ukraine. They said it was too early to draw conclusions from the observation, but the situation “is obviously very serious and must be improved quickly.”

Kiev soon admitted that it had, in fact, blocked the transit of Russian gas through its territory, citing “unacceptable conditions for transit” that had been imposed by Gazprom, a spokesperson for Ukraine’s state-owned Naftogaz, which manages the pipelines, told the French news agency AFP.

Regardless of who is right, it does not look like the EU is going to get its gas anytime soon.