Bob's Links and Rants

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Sunday, January 01, 2006

Cold war

Russia quadrupled the price of natural gas it sells to the Ukraine. Ukraine refused to pay, so Russia has cut the supply of gas to Ukraine. But gas will still be piped through Ukraine to Western European nations, so the question arises whether Ukraine will just let it pass through, or take its cut anyway. Eighty percent of Russian gas sales to Western Europe pass through Ukraine. Ukraine apparently has some gas stockpiled, and also imports from Turkmenistan.

While the quadrupling of the price seems outrageous, the $50 per 1000 cubic meters was a subsidized Soviet-era price, and by my calculations is about 1/8th of the current spot price for gas in the US. The new price demanded by the Russians will still be only about half of what we pay here in the US now.

The war in Iraq may have been the second resource war of the 21st century (Afghanistan being the first), but it surely won't be the last. This could get very ugly very quickly.