Four major pipelines pass through Ukraine transferring gas from Russia’s Great North to the European market. At the crossroads of the pipelines, Ukraine has benefitted from cheap, plentiful Russian gas that has helped fuel the prosperous industrial provinces of ethnic Russian east Ukraine.
Russia sold gas to Ukraine at hugely discounted prices in the past, but with the US supported routing and exile of President Viktor Yanikovych last spring, Russia roughly doubled the price of gas for Ukraine. In fact, Russia has set a deadline of today for Ukraine to pay $4.4 Billion toward its gas debt or Russia will shut off the tap.
IMF predicts that the Ukrainian economy will contract 5% even without a gas shortage. As bad as the situation may be for citizens of Ukraine, it is unlikely that they will be the only sufferers. Europe receives 15 percent of its gas from Russia via Ukraine’s pipeline system. Shutting off the gas will restrict supplies to Europe as well.
Astonishingly, pressure from the US has caused the shut down of another project created to transfer gas from Russia to Europe. From the AP:
Bulgaria’s prime minister has ordered on Sunday a halt to construction work on the Gazprom-led South Stream pipeline project planned to bypass Ukraine as a transit country and consolidating Russia’s energy grip in Europe.
Bulgaria shut down the South Stream project after a meeting in Sofia with Senators John McCain, Christopher Murphy, and Ron Johnson, where sanctions against Russia were presumably discussed. An action in the European Commission has accused Bulgaria of failing to respect EU contracting rules as well.
Europe needs Russian gas, but Russia doesn’t need the European market. Russia has another, larger customer to its east thirsty for Siberian resources and willing to partner with Russia on a host of other issues ranging from de dollaraization to sprouting green shoots of military cooperation. Why, then, does the US insist on undermining Europe while driving Russia east?
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Photo by Rich Anderson released under a Creative Commons Share Alike license.