Ukrainians should expect gas price hikes, subsidies for poorest citizens.

[dipsydoodle]

Source: Kyiv Post

Ukraine will increase household prices for gas by 50 percent in May, and the utility companies will see a 40 percent raise as of July, newly appointed head of Naftogaz Ukraine Andriy Kobolev said on March 26.

The price hikes will be compensated through direct subsidies for the poor, and this mechanism was set up by the Cabinet on March 23, but it is yet to be made public, Kobolev said. He was appointed to the job on the same day.

But even despite the price hikes, which have been approved by the government in conjunction with the International Monetary Fund, the Naftogaz budget deficit this year is expected to run up to Hr 80 billion, or 5.6 percent of the gross domestic product. The figure is based on the assumption that the hryvnia rate will balance around 10 to the dollar.

“This is a record number, and this is something we have to manage with along with the regulator,” Kobolev said.

Naftogaz Ukraine, the national mammoth gas importer, distributor and owner of transit and storage network, has been near bankrupt for years and bailed out by the government on a monthly basis. Many of the losses were caused by heavy across-the-board subsidies extended by the government to all gas consumers, as well as corrupt schemes that have thrived under each government in power.

Read more: http://www.kyivpost.com/content/ukraine/ukrainians-should-expect-gas-price-hikes-subsidies-for-poorest-citizens-340995.html

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A 50% increase will mean consumers will still be paying less than cost. The IMF and EU may demand a higher price increase as a condition of loans.

[happyslug]

1. And people wondered at President Yankovich's jump at Putin's offer of a price cut for Natural Gas.

I know it lead to his over throw, but then the question is why?

[uhnope]

2. Why the overthrow? Ukrainians are sick to death of corruption and lack of democracy

[dipsydoodle]

3. Is it safe to assume

you'll help them pay their bills when the austerity measures hit full force ?

[uhnope]

4. they've been unable to pay bills in Ukraine for years. Guess what? USA is not always to blame

for every bad situation

[dipsydoodle]

5. If their population have been unable to pay their bills for years

they'll be even less able to do so now.

You'll note from the article "the Naftogaz budget deficit this year is expected to run up to Hr 80 billion, or 5.6 percent of the gross domestic product". For that to be so they'd need to selling on average all gas at below cost so its hardly surprising the country has got economic problems. That's a deficit of c. $8 billion just for 2014.

US involvement , which is indeterminate , revolves around removing one of Russia's cushions against the west in terms of which the end will justify the means - as per usual.

[uhnope]

6. a grand conspiracy, in other words.

US doesn't support Ukraine for any reason but in order to remove Russia's "cushion"? Well, that's the Kremlincentric view.

Compare western Europe with eastern Europe, post WW2 to present, and judge for yourself which country, US or Russia, has had a more benign influence.

[joshcryer]

7. Russia had been ripping them off for years.

[go west young man]

8. Except they had actually been receiving a discount

compared to other EU countries in order for Russia to be able to run the pipelines through Ukraine. That is common knowledge and the basis of the 2009 renegotiation and stoppage and actually part of the Sevastopol navy base renegotiation. Ukraine was getting discounted gas. At one point they were caught siphoning off gas (millions of cubic litres) and Russia gave them a free pass on the theft.

http://en.wikipedia.org/wiki/2009_Russia–Ukraine_gas_dispute

[uhnope]

9. Russia plundered the other nations in the USSR and the Eastern Bloc

so it's just incredible you ascribe some altruistic motives to dictator Putin now.

Look at western Europe vs Eastern Europe from WW2 to now to see which country, US or Russia, had the more benign influence. Wake up

[joshcryer]

11. Yep, Putin is an extortionist of the highest degree.

The reduced price Ukraine pays to Gazprom is still so out of kilter that it is about $30 cheaper to buy gas the EU has imported and transport it back across the border. This re-importing had started to happen on a very small scale from Poland and Hungary. And on Dec. 9, Slovakia's gas transit company Eustream agreed on terms to reverse the flow in one of its big transit pipes.

With the necessary Slovak capacity, Ukraine might have been able to fulfill the deal it has to buy 10 bcm of gas annually from Germany's RWE AG. That would represent about a third of Ukraine's current imports from Russia, which had already fallen substantially because of Ukraine's declining gas consumption, due to a collapsing economy, coal substitution and efficiency improvements, according to Pirani.

Faced by competition from EU re-suppliers, Gazprom would in any case have had to choose: risk losing as much as another one third of its gas sales to Ukraine and associated political leverage, or else reduce its price by a third to make EU re-imports uncompetitive.

In sum, it's clear that the $268.50 discount offered to Yanukovych wasn't as generous as it sounds. Putin in essence agreed to stop extorting money from Ukraine and charge the market price.

http://www.bloomberg.com/news/2013-12-30/putin-s-deal-is-no-gift-to-gas-junkie-ukraine.html

[go west young man]

12. New Russia is not the Soviet Union...

although you may wish it to be. We are in 2014. The Soviet Union fell apart in 1991.

[joshcryer]

10. The stolen gas benefitted the oligarchs.

The Ukrainian government admitted to "siphoning" the gas, but guess who benefited the most from it? Eastern industry, pro-Russia, lots of pro-Kremlin districts / Oblasts. If anything it shows how utterly inept and corrupt Ukraine's government was, to allow such leveraging.

The pipelines were owned by Russia and the contract should've made Russia take all liability (theft, sabotage, leaks, whatever). The fact that Ukraine then went on to admit to the theft tells me a whole lot about their incompetence in this matter.

Regardless, Ukraine did not get a "discount." It was cheaper for Ukraine to reimport gas that flowed to the EU into their country. Ukraine, again, was on a fixed price fixed delivery contract. This is the most crony, undeniably stupid contract you can sign. It's the contractual equivalent of a payday loan.

Now it should be made clear, the stolen gas happened in 2005, the 2009 accusations were just a rehash but were never proven in court and no one knows what happened to it. Gazprom was supposed to be responsible for "technical gas" (gas that is used to maintain the operation of the pipeline), but Russia claimed Ukraine was responsible for any maintaining of ... Gazprom's pipeline.

Finally, it is uncontroversial that Russia has been leveraging Ukraine over the pipelines for a long time now, going back years.

[go west young man]

13. Funny that all that should take place....

while Russia decided to build North and South Stream to bypass Ukraine altogether. In other words the Ukrainian situation was not to the benefit of Russia and they felt they would be better off without them. It would stand to reason that if Russia was wanting to take advantage of Ukraine they would want to continue to do business with "their corrupt oligarchs" there, but instead they have chosen a different route. That speaks quite loudly, especially as from a Russian perspective there's money to be made. I think the corruption ran both ways and Ukraine had taken advantage of their position a few times too often.

Also ask yourself should Canada come down and maintain the pipeline being built through the US? Business is business...you know that Josh.