Ukraine in Turmoil After Leaders Reject Major E.U. Deal

[Double Edge]

~90% of Russian gas exports to Europe travels through huge pipelines that traverse Ukraine. Despite being a critical transfer hub for valuable Russian gas exports, Ukraine pays a higher price for Russian gas than end-user nations farther down the supply chain.

Won't transit fees help Ukraine here ?

[Minskaya]

Won't transit fees help Ukraine here?

Not really. Russia is laying new pipelines (north/south) to bypass Ukraine. The north leg is already finished.

Reports from Kyiv say that 100,000+ people are now marching in the capital. Police are (at present) staying away. The crowds are demanding that the Yanukovych government step down. Some members of the government have tendered their resignations due to the violence of Friday night. These are the largest protests since the Orange Revolution of a decade ago and no one knows just how far this will go. The comment of protester Natalia Kulishenko pretty much sums up the mood of the people... "Ukraine is our mother. How long can we allow our mother to be raped? We can no longer stand it."

[cyppok]

One of the biggest economic problems is the gas contract former president Yulia Tymoshenko signed with Russia/Gazprom. The 'deal' runs through 2009-2019 and Tymoshenko is now sitting in prison for inking it. Economics is not my strong suit, but I'll have a go at this as I understand it:

~90% of Russian gas exports to Europe travels through huge pipelines that traverse Ukraine. Despite being a critical transfer hub for valuable Russian gas exports, Ukraine pays a higher price for Russian gas than end-user nations farther down the supply chain. How can this be? Because Tymoshenko signed an exorbitant and enslaving 'take or pay' contract. The annual contracted volume is for 52 billion cubic meters a year. In 2012 Ukraine imported 32.9 billion cubic meters from Russia. But under the take or pay scheme, Ukraine is still billed for 52 billion cubic meters. In other words, Ukraine must still pay for 19 billion cubic meters it did not import/consume. Thus, reducing demand does nothing to reduce the outflow of payments. Even if Ukraine accepted the full 53bcm of gas, she cannot resell the excess 19bcm at a profit because she paid a higher initial price than end-users are paying.

If the full payment (used/unused) is not remitted, Gazprom threatens to shut off the gas supply entirely (and has done so in the past). It gets very cold in Ukraine in the winter. Most Ukrainians cannot afford to pay the individual costs required of this debilitating contract and there would be riots without affordable heating gas so the state energy utility (Naftogaz) subsidizes this cost to consumers. The government then borrows foreign money to pay for this subsidy which places the economy even further in debt. The IMF has said no to additional loans unless Naftogaz ends this subsidy. Only the thinnest of strands now keeps the frigid Sword of Damocles suspended.

Putin uses the gas contract as both a carrot and a bludgeon. Join my Economic Union and perhaps we will make adjustments. Sign with the EU and you had better never miss a payment. The combination of internal corruption and the take or pay Russian gas contract is ruining Ukraine. I think Russia has won a tactical victory here at the expense of a strategic defeat. The young people of Ukraine (the future leaders) will never forget the obvious extortion techniques of their immediate neighbor to the east.

its not 90% anymore its probably 30-50 since Russia built Nord Stream and Belarus sold its pipe.

The reason Ukraine paid more than Europe is because transit fees you charged per 100km of pipe were 5+times the norm. (ex) Ergo if it cost $3 to ship 1000 cubic meters 1000km in Germany, US to Canada, Austria etc.... it was $15+ in Ukraine.
That is why Russia cut volumes and you pay over the stated price because the embedded cost of transit is in the contract. Ukraine tried to win on transit so its' costs would be 1/3rd to 40% lower and subsidized by gas to Europe. It lost on both counts because it embedded the higher hurdle Russia shipped to itself.

(Their assumption was that for the 60mil cubic meters shipped to Europe via 1200km of pipe they would get 20mil as transit fees so Russia went around and they paid the excess cost to it once exports via Ukraine went down)
The other assumption was that since these transit costs would be carried by Europe the excess gas would be re-exported to Europe for a profit. Which once other venues of export opened was uneconomical so at the time the contract was a success but once Nord Stream and Belarus pipe lowered transit costs it was an insane burden.

[Minskaya]

Violence flared again today in the capital city of Kyiv. Government officials stated that 100 police officers sustained injuries and news correspondents said dozens of people with what appeared to be head injuries were whisked by ambulances to local hospitals. With crowds chanting "Revolution", a bulldozer was commandeered which tried to pierce the police cordon around the president's office. Crowds broke the windows to a ministry building which is now occupied. The demonstrations have now spread to many large cities including Kharkiv, Odessa, Donetsk, Zaporozhye, L'viv, Kherson, Sevastopol, Ivano-Frankivsk, Chernihiv, Rivne, and Horlivka. Hackers have closed the websites of the Presidential Administration and the Interior Ministry which control the security forces. President Viktor Yanukovych is supposedly at his residence in the north Kyiv suburb of Mezhyhirya and is said to be considering declaring a national state of emergency on Monday.

If this persists, the Yanukovych government will fall. People of all ages are fed up with government/police corruption and the younger generations consider Ukraine to be European and have no desire to remain a vassal of Russia.

Note: The events can be followed on Twitter using hashtags #euromaidan and #євромайдан or on Facebook at https://www.facebook.com/EuroMaydan. Live coverage from Ukrainian Public Television is available here

[Sitting Bull]

This situation is unfolding quickly, and tempers are running really high. Both sides have to step back or the Ukraine will go down the same bloody path as Syria. People destroying public property and attacking the police are going to get hurt- these are not peaceful protesters by any stretch of the imagination and the authorities may resort to firing live rounds into the crowds if they feel threatened.

[Mihais]

Minskaya,we still have to see what the reactions of both Russia and the Russians will be.It may be that they underestimated the reaction to the news.But not planning for such a contingency would be very unlike them.Their blue eyed boys don't struck me as stupid.
I don't know about Yanukovich and Putin,but such a violent reaction was foreseeable by anyone with a half a brain.

Russia has also been unusually silent about Moldova.Our beloved El Presidente also made some bold statements about a new national project:re-unification with Moldova,inside EU,of course.While he talks crap often enough and there are elections next year,the point is the Russians are busy elsewhere.Which can mean only that whatever their big move is,it has yet to be seen.

[zraver]

, but Ukraine under Russian only umbrella is not the best choice for now, IMHO.

In Putin's Russia, umbrellas go around neck like collar...

[Minskaya]

The protesting crowds in Kyiv yesterday are estimated to be in the 300,000-500,000+ range. Larger than the Orange Revolution. The Kyiv City Hall and two ministry buildings are now occupied. (Incidentally, one of those occupying City Hall is Pyotr Verzilov - husband of jailed Pussy Riot member Nadezhda Tolokonnikova who is somewhere in the Russian gulag). The police chief of Kyiv tendered his resignation which was not accepted by the Interior Ministry. Cracks have begun to emerge in the political base of Yanukovych. His chief of administration was reported to have resigned and a few members of Parliament quit his Party of Regions and decried the police violence. Russia has been silent, but it will be impossible for Yanukovych to join Putin's Eurasian Customs Union. The government has asked the opposition leaders to meet for an open discussion with them on on Monday. I don't think they will accept anything less than the removal of the Yanukovych government and Ukraine's official alignment with the EU. The opposition protests will continue and a national strike has been threatened which has already occurred in L'viv.

[Doktor]

The country that had the biggest problems as a result of joining the EU was Greece. They accepted the easy money and ending up getting enslaved. These are all lessons for other smaller countries to take heed of. joining the EU effectively means ceding control of your currency exchange rate. When times are bad there is very little room to manouver, whereas if you hold on to your currency you just depreciate it and can counter better.

You somehow wired it wrong. Greece had issues only after they cooked the books to join the Euro, decades after joining EU.

And the problem in Greece is systematic, similar to what Mihais describes about Romania atm.

[Double Edge]

This situation is unfolding quickly, and tempers are running really high. Both sides have to step back or the Ukraine will go down the same bloody path as Syria. People destroying public property and attacking the police are going to get hurt- these are not peaceful protesters by any stretch of the imagination and the authorities may resort to firing live rounds into the crowds if they feel threatened.

Or it turns out like Egypt



When there is no mechanism for no-confidence vote, people run to the street.

[cyppok]

The Party of Regions faction in Parliament will not vote for the government's resignation, head of the Party of Regions Oleksandr Yefremov told a briefing, ForUm correspondent reports.

PR deputies will not vote for Cabinet’s resignation - ForUm

Strike declared just in Lviv, Ternopil regions

Nationwide strike called for by the opposition on December 1, has been supported only by the city councils of Lviv and Ternopil regions.

Monitoring situation in the country, ForUm correspondents called to regional administrations and found out that the state-owned enterprises, institutions and organizations continue to operate normally.

In some regions today there will be held sessions of regional councils. In particular, ForUm correspondent learnt from the Kharkiv Regional Administration that, perhaps, the issue of national strike will be considered on the session. Vinnytsia and Khmelnytsky regional state administrations got the same answer.

Plenary sessions of the regional administrations are also planned to be held in Odesa and Luhansk.

Large enterprises reject commenting on calls for strike by phone. However, they say they are working in normal mode.

Strike declared just in Lviv, Ternopil regions - ForUm

National strike will not happen I think. Regional perhaps. The gov't won't leave before 2015 no matter how many people go to the street. Amount of protesters is actually less than during the Orange Rev time by magnitude.

[Minskaya]

The gov't won't leave before 2015 no matter how many people go to the street.

The Rada will take up the question of a no-confidence vote tomorrow. I also don't see the Party of Regions submitting voluntarily. The situation could further deteriorate.

Government admits helplessness, asks for a new deal with Europe
Dec. 2, 2013

Prime Minister Mykola Azarov admitted on Dec. 2 that his government was helpless to handle mass protests in the streets of Kyiv that have lasted for more than a week, and said they looked like a coup. At the same time, President Vitkor Yanukovych reached out to Europe for a new deal after failing to sign an agreement last week. The government's failure caused outrage and mass protests across the country. Azarov's comments come on the eve of a no-confidence vote, which is set to take place in parliament on Dec. 3. The likely outcome of the vote is not clear as the opposition has no majority in parliament, while the ruling party of regions – although in disarray – is not likely to support a no-confidence motion against its own party leader Azarov.

In the meantime, President Yanukovych called President of the European Commission José Manuel Barroso to discuss the riots that have been raging across the country. Barosso told Yanukovych that “a peaceful and political solution is the only way for Ukraine out of the current situation,” the press service of EU Commission reported. He also advised Yanukovych to immediately investigate “the use of force by the police,” respect civil rights and liberties and “urgently engage with all relevant political forces.”

Yanukovych, on his part, asked the European Commission to receive a delegation from Ukraine to discuss a deal with the EU, preparations to which were stopped by initiative of Ukraine’s government weeks ago. Azrov said that his First Deputy Serhiy Arbuzov will travel to Brussels to negotiate the deal. Arbuzov, in his earlier briefing on Dec.1 indicated that Ukrainians are prepared to be more flexible in negotiations. EU officials have repeatedly said that the door to EU remains open for Ukraine.

Source: Kyiv Post

[cyppok]

Оппозиция ведет переговоры про создание временного правительства Оппозиция Украины начала вести переговоры касательно создания в стране временного правительства.

roughly translates to:

Opposition holds talk to create a temporary transitionary government.

- | - -,

Now read that again and think for a minute.
If this happens Party of Regions and their supporters would count for nothing. At that point you essentially nullify a fairly large portion of the electorate and their choice. If they cease to matter and count for nothing why should they respect and/or comply with that "new" gov't.

If political arena is worthless and the only way to get your point across is to go to the streets and win there then those with resources will probably start doing that. Imagine this on a regional level where one oligarch would benefit from EU and another would not.

It is certainly getting interesting. I still think there will be no power change until 2015 and it will all blow over.

[Minskaya]

It is certainly getting interesting. I still think there will be no power change until 2015 and it will all blow over.

It is indeed. What happens when the party in power (the pro-Russian Party of Regions) is no longer representative of the majority of citizens?

One conclusion is certain. Yanukovych, Putin, and the EU all badly misread the tea leaves.

[Doktor]

I must admit something. I have no clue what the hell is going on in Ukraine. To my comfort it seems noone does.

How wicked the whole thing is to me I will really appreciate if someone guides me here.

Yulia is in jail for signing a contract with the Russians giving them $bns every year, but she is labeled pro-EU, the current government works on agreement with EU, yet they are labeled pro-Russian. The people are on the streets demanding Ukraine in EU. The President (also labeled pro-Russian) is for Ukraine in EU, but asks for better incentives as otherwise the economy will get messed up.