Gazprom - Naftogaz Ukrainy Dispute:
Business or Politics
Presented By:
Debarati Saha
Chenna Rajesh
Gagandeep
Seemab Sulemani
Sanchi Sangal
Saket Jhanwar
Gazprom
• 1989:Formed Under Mikhail Gorbachev’s reform of
Perestroika and Glasnost
• Largest extractor of natural gas in the world
•
• Largest Russian company
•
• 2008: Produced
549.7 billion cubic meters (BCM) natural gas
32 million tons of oil
Accounted for 10% of Russia's GDP
•
•Supplies gas to-
22.8 million homes
12,200 industrial facilities
29,600 boiler houses
•Owns Russia’s Unified Gas Transportation System (UGS) –
Largest gas transportation system in the world
Exports to Europe
•Started in 1940’s by the Soviet Union to Poland
•
•Large scale exports in 1967 to
Central and East European countries
•
• Exports were Highly Subsidized
•
•Gazprom maintaining the cordial commercial relations
•
•Agreement s - Joint Ventures with France, Italy , Austria et
•
•In 2004 Gazprom Exports to Europe:140.5 Bcm
•
•
•
Russia – Ukraine gas dispute
Disintegration of Soviet Union .
Russia- agrees to supply oil and gas at highly
•subsidized rate .
Recipients were prohibited from re-exporting.
•
After disintegration – Russia refused –recognition of
• Ukraine’s sovereignty.
•
Russia’s problems with Ukraine
b.
c.
d.
1.Control of nuclear weapons
2.
3.
4.Ukraine –monopoly over Russian gas exports to Europe
5.
6.Disputes-price and mode of payment for this transit also: its
domestic consumption.
7.
8.Ukraine’s Naftogaz-purchase and supply domestic gas.
9.
10.Bitterness between Gazprom and Naftogaz.
Gas Disputes In 1990’s
Russian financial crisis
a.Fall in Rouble .
b.
c.Slump- gas and oil prices
d.
e.Non –payment in domestic Russian market.
•
Warned- stop illegal withdrawal of gas.
•
Russia cut supply.
•
Siphoning increased.
•
Russia’s and Ukraine’s focus-new pipeline
•
In 2004 reached agreement
•
Naftogaz debt- Vnesheconombank
•
RosUkrEnergo replaced Eural Transgas.
Elections in UKRAINE
•Vikitor Yanukovych • Vikitor Yushchenko
• Prime Minister • Ex-Prime minister.
• •
• Outgoing president • Advocated closer ties with
Leonid Kuchma. west and EU.
• •
• Russian President
Vladimir Putin. • He was a champion in
market –oriented
•
economic reforms .
• Closer ties with his big
neighbor Russia.
• ORANGE REVOLUTION, resulted in 3rd round of elections.
•
• The new government favored EU and NATO
•
• March 2005, Yushchenko asked to raise Gas transit fee to European
level, 0.9/Tcm/100 Km in Belgium and 4.5/Tcm/100 Km in
Greece.
•
• In reply, Gazprom accepted the proposal but raised Gas prices to
European levels, which averaged to US 230$ (in cash).
•
• May 2005, Dispute regard to storage of 7.8Bcm
TURN OFF EVENTS
November 22, 2005
• Gazprom’s demand for US$ 160 per Tcm
•
December 9, 2005
• Revaluation of lease facilities
•
December 13, 2005
• Demand for US$ 230 per Tcm
• Gazprom proposed a joint venture
•
December 29, 2005
• Gazprom’s deal with Turkmenistan
•
December 30, 2005
• Offering commercial loan & a halt in price rise
•
Few concerns. . .
Mutual dependence between Gazprom and EU
Independence comes at a cost
Political aspects
Analysts says, increase in gas prices was Russian
• way of punishing Ukraine.
•
On the other hand some say , as Ukraine was moving
• to market economy ,it should pay market prices for
• its imports .
Jan1,2006 Gazprom cutoff gas supplies.
Settlement
•Jan4,2006 Gazprom and Naftogaz enters five year
contract.
•Gazprom will supply gas to Rosukrenergoat
US$230per Tcm
•Rosukrenergo will supply gas to Naftogaz at US$
95 per Tcm
•All transactions will be in cash.
Limitations
Did not touch the issue of future prices.
•
Turkmenistan entered into contract with Gazprom to
• supply 30Bcm of gas in 2006
•
Agreement was drawn up hastily to resolve the
• crisis.
Causes of rise in the prices of Gasoline
Refining capacity of oil
Depletion of oil reserves
Deter consumption so as to preserve for future
Dependence on imports
•
Global demand leads to fluctuation in price
•
Gasoline prices and US Economy
Effects of high gasoline prices
Mobile economy affects transportation
Increase in prices of products
Drop in sale of luxuries
Drop in sale of cars
Increase in sale of cars with better mileage, electric cars
Effect of high gasoline prices
