Jim Dean -- Russia-Ukraine Gas Transit Deal Nears Completion
27.12.2019 Author: Jim Dean
“Just societies cannot be run by big money or armed
forces with their too narrow agendas. Limitless desire for wealth and blind
ambition must be watched and contained as potential public dangers.” ~
Plato
It was a deal that many said could never be done. Why?
Because of too much bad blood, as in $125 billion in counter claims between
Russia and Ukraine, which made it the largest arbitration dispute in history.
Agreement was announced on December 21st that both parties have agreed to
settlement terms to for a new five-year gas transit contract where just about
everybody comes out winners.
No one attempted to strong arm the other party into a
bad agreement, as both needed a settlement that both sides could benefit and
live with financially and politically. Long term budget planning had been
floating in the air for both sides without predictable sales volumes for
Russia’s Gazprom and transit revenues for Ukraine’s Naftogaz, money desperately
needed for Zelensky’s budget and a needed big accomplishment for the new
president.
The Stockholm arbitration agreement had given Ukraine
a $2.9 billion award which Russia will be paying, and Ukraine agreed in return
to drop $12 billion in pending claims.
While Ukraine had wanted a 10-year deal, Russia did
not want to go that far now, but did agree to having a 10-year renewal option.
We have not yet seen what the fine print in the option is, but I bet you it has
a clause along the lines of “if both parties have faithfully abided by the
terms of the agreement.”
The political ramifications are more complex, as they
involve both real and fake issues. The main real issue was that the EU wanted
to solidify needed gas imports, which are at record levels due to a decline in
European production. Germany especially was in favor of multiple gas lines
serving Europe from various directions as protection against war and
geopolitical uncertainty, like the unpredictable trade sanctions from the US.
Trump has already unleased a new barrage of year-end Russophobia in his build
up to his State of the Union address in January.
Despite what Trump and the NeoCons think about
excessive dependence by the EU on Russian gas, they conveniently leave out of
their analysis that the deal makes them cross dependent on each other, a
win-win for both.
The 40 billion cubic meters of gas flowing through
Ukraine to the EU in years 2 through 5 of the contract, added to the double
Nordstream pipe flow of 110bcm when the second line is completed will cover a
major chunk of the EU’s 200 bcm market for natural gas. That leaves room for
the Turkstream project to add additional supplies and a better future
distribution network, particularly for the Balkans area.
The EU was master of ceremonies for assisting Russia
and Ukraine work their way through a long list of disputes and did not let one
of those torpedo the deal. Both sides accepted that transit pricing had to be
done based on already established EU regulations, which removed endless
debating for which there was no time left.
Politically, all are winners but the US. The EU has
solved its declining gas production shortfall, along with Germany winding down
the last of its nuclear power plants by 2022. The EU has chosen natural gas to
run on for the foreseeable future for many reasons.
Because it is critical to home winter heating and
industry, the EU has continued to facilitate a more diversified supply network.
With its flat 1% growth prediction for next year, maintaining low gas prices is
not a luxury but critical for protecting the EU from going into a recession if
the trade wars continue to get worse or if someone starts a stupid war which
would tank EU economies even more.
The market responded quickly to the news, with natural
gas prices falling sharply. That is bad for Mr. Trump’s unrealistic plans to
twist the EU’s arm into overpaying for US LNG as part of US sanctions relief.
Trump got China’s president Xi to agree to buy $50 billion in US agriculture
and pork products to work toward relieving the big trade imbalance.
Europe does not want to play a similar game, because
frankly it does not want to buy a lot of US products that Europe does not want,
with expensive US LNG at the top of the list. And Germany’s Merkel is up in
arms over Trump’s sanctioning Nordstream2, when it is a month or two from being
finished.
The Swiss-owned undersea pipelaying company Aleses
agreed to stop operations after receiving a threat of “crushing sanctions” from
Senator Ted Cruz. Merkel quickly said the pipeline would be finished, without
details as to how.
That has been followed by Dimtry Peskov on December
12th stating that the Nordstream 2 will be finished, and that the sanctions
were,
“a direct violation of international
law” and “an ideal example of unfair competition and the spread of
their artificial dominance in European markets, …and that, “imposing on
European consumers more expensive and uncompetitive products – more expensive
natural gas.”
Despite the US throwing more and more sanctions onto
Iran, it keeps discovering new oil fields; and today announced it started
pumping natural gas out of its new sea platform; 14.2 million cubic meters
(mcm) a day out of its third drilling rig in phase 14 of the South Pars field,
the largest in the world. The continuing new production of gas will keep prices
down in a world that needs low cost energy and lots of pipelines to move it
around.
Russia gained a diplomatic bonus, as the agreement
shows that it was always fake news of a Russian threat to take over Eastern
Europe. Russia wants to do business, as productive trade relations are what tie
countries together with the bonds need to defend against “trade interference”
which seems to have become in vogue with the Trump regime.
I have written numerous time over the last five years
how, before the US-NATO violent coup in Ukraine, Russia enjoyed an $110-billion
trade surplus with Europe, which it was turning around and spending most of it
on importing a variety of EU products, both food and manufactured goods.
So why would Russia want to kill the golden goose of
great business relations with Europe? Putin was focused on building a strong
balanced economy to support Russia’s recovering from the horrible 1990s, when
the US Deep State gangsters had looted the country blind.
As with all the chaos we see currently in the world,
none of it happened accidently. With hindsight, we can see how it was staged to
create the current conditions, which can be exploited by the unipolar
gangsters, who consider that working on a level playing field is only for
suckers. They preferred a poker game where they had a marked deck, plus the
ability to change the rules on the fly so the home team always won.
We go into the new year with the Brexit torment
hopefully over for all of us but the Brits, who may look back in it as a
walking the plank exercise. Trump looks like he is holding off inking the China
trade deal when the impeachment circus has hit a lull, and he can use that to
kick off his 2020 reelection campaign.
However, Trump has a problem. Despite that the
Republican Senate has guaranteed not to remove him from office, the polls now
show the public would. That could be the wound that seals his fate next year.
The Democrats have left open that if the House can get access to the Trump
business and financial records that it wants, there may be new impeachment
charges in that material, and this is why he has fought so hard to keep his
financial records hidden.
I am afraid we will start out 2020 with continual
turmoil that will serve only the few at the expense of the many. The unipolar
versus multipolar battle will continue until a winner emerges.
Jim W. Dean, managing editor for Veterans Today,
producer/host of Heritage TV Atlanta, specially for the online magazine “New Eastern Outlook”.
No comments:
Post a Comment