UPDATE 1-Russia's Gazprom announces big gas price rise for Ukraine

[dipsydoodle]

Source: Reuters

(Reuters) - Russian natural gas producer Gazprom announced a more than 40 percent increase in the price Ukraine must pay for gas on Tuesday, stepping up economic pressure on Kiev in its political standoff with Moscow.

Ukraine will now have to pay $385.5 per 1,000 cubic metres of gas in the second quarter, an increase form $268.5 that was agreed in December, before the ouster of Ukraine's Moscow-backed president and Russia's annexation of Crimea from Ukraine.

Gazprom's Chief Executive Officer, Alexei Miller, said the increase was needed because Ukraine's debt for unpaid gas bills now stood at $1.7 billion.

"The December discount for gas cannot be applied any more," Miller said, adding that the transportation tariff for Gazprom's gas to Europe via Ukraine was increasing by 10 percent, in line with earlier agreements.

Read more: http://uk.reuters.com/article/2014/04/01/ukraine-crisis-gas-idUKL5N0MT14Z20140401

[Duckhunter935]

1. I guess Ukraine

will raise the prices of electricity and gas sent into Crimea. Curious if Russia will actually pay or just invade. This gas issue I am sure was not unexpected.

[dipsydoodle]

2. Last reference I saw

was that Crimea is now / will become an autonomous oblast / enclave same as Kaliningrad.

Although mention had been made of Ukraine cutting off utilities including water to Crimea their government subsequenly denied that is likely to occur.

On the subject of gas pricing , notwithstanding Gazrom's price it became clear a few days ago that Ukraine had been getting an additional $100 / 1000 cu metres of gas since 2010 and that has now been ended. That discount was an adjustment by Russia as part of the naval base lease agreement by removal of duty payments due from Gazprom for the gas so supplied. I would imagine that Crimea will continue to get that discount somehow or other along with the $1 billion p.a. lease payment even if only by contra entry in Russia.

[happyslug]

3. The problem is the Crimea is the main area of Ukrianian gas and oil production

http://euobserver.com/opinion/123496

Thus the Ukraine can NOT cut off Natural Gas and oil to the Crimea, for the path is the from the Crimea to the Ukraine. On the other hand, the electrical power is from the Ukraine to the Crimea, but from RUSSIAN Speaking areas of the Ukraine.

Furthermore, electrical main use is in industry, thus urban USA and Russia had electricity decades before electricity become common in rural America and Rural Areas of Russia (Electrical service to homes was and is a sideline to supplying electricity to businesses and especially industry in the USA and most other countries).

Furthermore given Crimea main historical role has been as a Naval Station, the ability to be self sufficient in electrical generation is very large (reinforced by the sieges the Germans did to Sevastopol during WWII). Thus while the Ukraine can cut off electrical supplies, how much that will affect the Crimean appears to be minimal, given its ability to product Oil and Natural Gas, both of which can be used to generate electricity.

Thus, what the Ukraine can do to the Crimea is minimal, given that the Crimea has been viewed as an important strategic area for Russia since Catherine the Great took it over in 1763 (And her policy seems to be a carry over from the Strategic vision of Peter the Great of around 1700).

[uhnope]

4. Putin's War for Oil

[karynnj]

7. I have no idea who wrote this, but their comments on electricity to rural areas is ridiculous

It doesn't matter what % of electricity is used by industry, people in private homes - even in rural areas - have depended on electricity.

In the US, the 1935 rural electrification act - that helped FDR deal with unemployment - provided electricity to rural areas.

[happyslug]

8. I am familiar with Rural Electric Co ops, I deal with them quite often

But compared to industry, they are a drop in the bucket when it comes to electrical usage. The same with the Crimea, outside of the Military bases, the use of electricity is LOW compared to the rest of the Ukraine. Military bases tend to be self sufficient when it comes to electrical power, especially in areas where conflicts have occurred in the last 100 years (US military bases in the US tend NOT to be self sufficient, for most are just training sites. Overseas US bases tend to be self sufficient as to electrical power, as are missile sites and other sites that may be needed in a crisis).

Thus Rural Crimea can be converted to power from the base in Sevastopol with out much trouble. Such a switch probably has been in Soviet/Russian Military plans since WWI let alone WWII. Thus electrical power is not a big concern, as long as the Crimea has access to Natural Gas and oil to drive any electrical generators.

[Bosonic]

5. UPDATE: Gazprom, Rosneft May be Cut by Moody's

UPDATE: Gazprom, Rosneft May be Cut by Moody's

(Updated - April 1, 2014 12:29 PM EDT)

Moody's Investors Service has today placed on review for downgrade the Baa1 ratings of the Government-related Issuers (GRI) OJSC Gazprom (OTCBB: GZPFY)) and OJSC Oil Company Rosneft (OTCBB: RNFTF), and the Baa1 ratings of their respective guaranteed debt-issuing subsidiaries. Concurrently, Moody's has placed on review for downgrade the Baa2 ratings of Gazprom Neft JSC, a subsidiary of Gazprom, and Baa1 ratings of Rosneft International Holdings Limited (RIHL), a subsidiary of Rosneft, and the respective ratings of their guaranteed debt-issuing subsidiaries.

Gazprom's Prime-2 short-term rating is not affected by this review and remains unchanged

These rating actions follow Moody's placement of Russia's Baa1 government bond rating on review for downgrade on 28 March 2014. For additional information, please refer to the related announcement: https://www.moodys.com/research/Moodys-places-Russias-Baa1-government-bond-rating-on-review-for--PR_294200

RATINGS RATIONALE

The placement of Gazprom's and Rosneft's senior unsecured issuer ratings on review for downgrade reflects Moody's view that the ratings of the companies are closely aligned with that of the sovereign, and that they remain sensitive to changes in sovereign creditworthiness. As noted previously, Moody's views Russia's weak institutional strength assessment as an impediment to rating Gazprom and Rosneft above the sovereign's rating level.

http://www.streetinsider.com/Credit+Ratings/UPDATE%3A+Gazprom,+Rosneft+May+be+Cut+by+Moodys/9338178.html

[Sunlei]

6. wonder if the big Gazprom investors (like romney) will take their money out of Russia now or wait

for the HUGE profit margins to dip lower?

http://www.bloomberg.com/quote/GAZP:RM