RUSSIA AND UKRAINE

The Politics of Transition Mechanism Structure of the Gas Market from Monopoly to Liberalisation: A Case Study of Russia and Ukraine Conflict

The Politics of Transition Mechanism Structure of the Gas Market from Monopoly to Liberalisation: A Case Study of Russia and Ukraine Conflict

Introduction

The Russian-Ukrainian gas dispute is over years rekindled the conflict between Russia and the Ukraine, who are the questions of gas supplies to Ukraine and turns the question of transit to Europe. The first conflict began in March 2005 with the Russian announcement of wanting to give up the old Soviet trading patterns, according to which the prices were charged for both services with one another and often subject to extremely discounted, non-market based pricing. The dispute has great international significance, because flow through Ukraine about 80 percent of Russian gas exports to Europe because Ukraine is itself the world's fourth largest importer of gas.

Discussion

Overview

The conflict began in March 2005, when Russia, the conditions for transit transportation of natural gas across Ukrainian territory into Western Europe as well as the price that Ukraine should pay for natural gas imports in favor of market-oriented pricing policy stipulated. Because Ukraine refused to accept the new conditions and a contract for 2006 failed to last, Russia introduced on 1 January 2006, gas exports to Ukraine. This resulted in short-term shortage of supply in different European countries. From an economic point of view were OAO Gazprom, the Russian side and NAK Naftohas on the Ukrainian side of the counterparty. According to The World Factbook , Ukraine is the world's fourth largest importer and sixth largest consumer of natural gas. This is caused by the little energy-efficient industrial operations and waste and inefficiencies that were previously funded by the low gas prices: In relation to gross domestic product of Ukraine has the highest gas consumption in the world.

Ukraine consumes 80 billion cubic meters of natural gas per year at present. 20 billion come from our own production, about 36 billion will be bought in Turkmenistan. 17 billion relates to Ukraine in return for transporting Russian gas to Europe and the rest (6 to 8 billion) to buy from Russia.

Currently about 80 percent of Russian gas to Europe via Ukrainian pipelines to transport.

The opportunity costs that arise annually from Russia reduced gas prices to Ukraine will be approximately four billion dollars.

The proportion of the addressed to Ukraine gas in the total amount, which is pumped through it, is about 20 percent.

The Ukrainian economy (not least because of cheap gas) is very energy-heavy. Ukraine is the sixth largest natural gas consumer in the world; their consumption is about 73 billion cubic meters annually.

About 25 percent of its natural gas requirements produce the Ukraine itself, another 40 percent it relates to Russia from Turkmenistan. The rest comes from Russia.

By subsidizing the Russian gas price in Ukraine had been significantly lower than in Russia itself, in many areas, especially in the metal industry, supplied to Ukraine in the Russian market at dumping prices, overreached and then ...