Robert Rand, BURN Editor
Just around lunchtime today, Dmitry Medvedev, the Russian Prime Minister, sat down to chat with Aleksei Miller, the head of Gazprom, the Russian state gas monopoly.
“So how’s it going?” Medvedev began, according to a transcript of the conversation released by the Russian government. “Anything interesting happening? Anything good going on?”
“We’re exporting 162 billion cubic meters of gas to Europe,” Miller said, adding that in 2013 more than half of that volume flowed through pipelines that transit Ukraine.
The transcript didn’t say whether the men were smiling.
Moscow shut down those pipelines during a pricing dispute with Kiev in January, 2009, causing widespread wintertime fuel shortages in Europe during a time of peak demand.
Miller’s statement seemed designed to remind the European Community that it could happen again if the West, in response to Russia’s seizure of Crimea, leveled sanctions against the Kremlin.
The EU imports nearly a third of its natural gas requirements from Russia.
After a bit more chit chat from Miller, Medvedev got to the point of the meeting.
“So let’s talk about current events,” Medvedev said. With theatrical understatement he continued: “How are relations with Ukraine? Are there any new problems going on, or is everything as it was in the past?”
Following the revolution in Maidan square, of course, very little between Ukraine and Russia remains the same except for the fact that the Kremlin supplies Kiev with some 70 percent of its natural gas requirements. Russian President Vladimir Putin cut the price of that gas by nearly one-third late last year in a deal that convinced the deposed Ukrainian president, Viktor Yanukovych, to step back from establishing closer economic and political ties with the EU. That move triggered the political revolt that sent Yanukovych fleeing to Russia, where he remains.
Miller went on to tell Medvedev that Ukraine, whose economy is crashing, is 1 billion 529 million dollars behind in its natural gas payments to Russia. “Ukraine hasn’t fulfilled its obligations,” Miller said. “Gazprom has decided not to extend the subsidy beginning the first of next month.”
Medvedev was ready with a reply.
“He who doesn’t pay his bills must understand that there will be negative consequences,” he said.
The Russian prime minister and Gazprom chief executive met in a town called Gorky, outside Moscow. Gorky means “bitter” in Russian. It’s not clear whether the venue was intended deliberately to underline the Kremlin’s mood regarding developments in Kiev.
Afterwards, the Russian government’s Twitter feed reported the news:
Правительство России @Pravitelstvo_RF 5h
«Газпром» с апреля отменит льготы на газ для Украины в связи с неисполнением Киевом обязательств по контракту http://bit.ly/1eQpHeU
“From April Gazprom will curtail favorable gas pricing for Ukraine in connection with Kiev’s failure to fulfill contractual obligations,” the tweet said.
Just as this registered on social media, U.S. Secretary of State John Kerry was in Kiev, voicing Washington’s support for the new Ukrainian government and, as the saying goes, putting money where his mouth is. Kerry offered 1 billion dollars in loan guarantees to help offset the price rise in Russian gas.
In related economic news, the ruble fell to a record low against the dollar yesterday in reaction to developments in Ukraine. With more value for the American currency, it would be a good time to visit Russia if you were inclined to do so.