December 11th, 2013
01:43 PM GMT
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Geographically, Ukraine straddles Eastern and Western Europe, but the President Viktor Yanukovych is finding it increasingly difficult to balance the country’s interests.

Yanukovych came into power touting his close relations with Moscow and he maintains when it comes to energy supplies they are essential for Ukraine and Europe as well.

"I think Europe will sleep peacefully in warmth if Ukraine has good relations with Russia, if there are no such conflicts like when we were shut off from gas,” he said on Ukrainian television. “This is unacceptable, so we need to protect our own interests," said Yanukovych.

Ukraine still gets 60 percent of its gas from Russia, but the level of dependence wanes the further one gets away from the Eastern and Central European neighbourhood.

Bulgaria gets all of its natural gas supplies from Gazprom, the Russian state energy giant; the Czech Republic 80%. Germany remains a big customer, but at just below 40%, dependency on Russian gas is much less compared to when supplies were cut off in 2006 and 2009.

What is important to watch are the signals sent from Moscow in terms of both direct funding to Ukraine and potentially re-working the 2009 gas agreement.

This is Ukraine’s third recession since 2008 and foreign reserves have dropped to their lowest level since 2006. A successful agreement from Moscow, according to Laurent Ruseckas of IHS CERA, would be obtaining up to $10 billion and a cut rate deal on gas prices.

This would allow the Ukrainian President to tell those still protesting on the freezing cold streets of Kiev that he can obtain some political payback for not signing on to the association agreement with the European Union.

While he deals with this crisis he knows full well that decisions this week will likely impact any hopes he has for re-election in 2015.

Filed under: BusinessDefteriosGlobal Exchange

soundoff (5 Responses)
  1. jacob schonberg

    Europe can easily get the needed gas through the new tubes in the baltic see that go direct to Germany. Also Germany has stocked enough gas for 1 winter if they are cut off. Then more gas is coming from many other sources as well as shalegas. Ukraine only need so much gas because they waste a lot of it . Insulation is almost niot done – it is just terrible to see the amount of energy lost on very cold winter days. We can have minus 20 deg every night for many weeks. Russia DOES NOT GIVE ANYTHING – they can offer to refinance because the money is not there anyway. The also DOES NOT GIVE any discount on gas "! They trade and to trade with russia is really expensive – also their legals system is terrible as well as their press - If ukraine thake the sugar Russia offers then it is only covering a very bitter pill – The people demonstrating on Maidan know all about the Russian system and they do not want any of it ! President Viktor Yanukovych is not in line with his own people – if there was an election now he will loose to any other candidate – His party – the party of regions has failed to gain the confidence of the people. This is not easy in a country this much corrupt – but they could do much more to help business owners and entrepreneurs are allmost not exisiting. The worst is that President Viktor Yanukovych has made almost all countries distrust Ukraine – because of him Ukraine has no friends. many greetings Jacob schonberg

    December 11, 2013 at 4:34 pm |
  2. Alex

    The pending association treaty with EU will lay hard burden on Ukraine economy due to the need to comply with numerous EU standards, as well as the breaking up the free trade with Russia, on which Ukraine exports relies much. As EU refuses to supply a noticeable relief, Ukrainian govt had to postpone the signing of the treaty to settle these issues. A lot of Ukrainian people esp. from rural areas have been brainwashed into believing the signing of this treaty will turn Ukraine into the land of milk and honey. Their protests are stirred up by corrupt opposition politicians eager for power. Pres. Yanukovich is not faultless but at least commands authority to provide stability and unity of the country facing the 2015 pres. elections.

    December 12, 2013 at 12:24 am |
  3. maconsultancy

    Reblogged this on Mr Business Info Blog – UK Business Financial Information.

    December 12, 2013 at 8:53 am |
  4. Af Askbyn

    If Ruusia asks Ukraine to sell their agricukltural produce at a price that is lower than the market, what answer will you expect? As regards natural gas, Ukraine does not wish to pay the market price. They do not wish to pay at all, the steal gas, block transit,etc. Pure inuslation of homes and waste of energy? I agree, but is it President Yanukovich's fault. How about his prdecessors, president Yuschenko and primier Timshenko. They were in power during the previous period and did nothing to prevent wasting and insulate. Btw, pro-western Timoshenko is currently serving her jail sentence for signing the gas supply contract with Russia. East or west, Russia or Europe, Ukrainian have to stop singing "Hosanna!", stop wishing to get things for free or at a heavily discounted price and start working.

    December 12, 2013 at 11:08 am |
  5. Joe Rassam

    Does anyone really believe that this is only or primarily about energy and that Russia is truly the Ukraine's solution to its problems? Russia controlled the Ukraine for decades under its Iron Curtain, and how well did that work for the Ukraine? It's no wonder that many Ukrainians, especially those who were alive under the days of the Iron Curtain, want nothing to do with closer ties to Russia.

    January 4, 2014 at 6:29 pm |

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