SELF-INTEREST AND RUSSIAN ATROCITIES -BY Dr. BOBBY SRINIVASAN AND Dr. SUDHAKAR BALACHANDRAN

August 1, 2014 | Posted by bobbysrinivasan << back to blog

The developments in Ukraine are a major concern to the global economy. The Russian army went into Ukraine and fought a war and managed to split the country into two parts. Russia was specifically interested in Crimea and the Black Sea area because it gives them a position in the area where the NATO forces are lined up on the other side. The Ukraine economy has been shattered by the Russian invasion. On top of that, Russia is squeezing Ukraine economically. For example, last month Gazprom, the Russian gas exporter cut deliveries for domestic use over unpaid bills. But Ukraine has so far continued to send its gas to EU members through the pipelines that cross it. Analysts now worry that things could change and serious problems could arise, if the deal is not soon reached between the countries.

The latest developments echo similar disputes in 2006 and 2009 when gas flows were reduced during the freezing winter season. Russia cut off deliveries passing through Ukrainian pipeline over claiming that the country was siphoning gas. Russia meets almost a third of European gas demand, half of which comes through Ukraine. Industry watchers are concerned about supply disruptions in the rest of Europe and price rise. There are real supply problems building across Europe which will be an issue during the winter as people turn on their heat. Western Europe can cope much better with disruptions; thanks to supply from Norway and Algeria, imports of liquefied natural gas ad relatively high storage levels but countries such as Slovakia and Hungary, Bulgaria and Greece are particularly vulnerable. Look at the following data:

Gazprom exports in 2013

	Imports (in cubic meters)	Percentage of requirement
Slovakia	2.6 million	100
Bulgaria	2.8 million	100
Greece	2.6 million	69
Hungary	6 billion	65
Ukraine	25.1 billion	56
Germany	40.2 billion	45
Italy	25.3 billion	37
UK	12.5 billion	16

As you can see from this data, Slovakia, Hungary, Bulgaria and Greece are the most dependent on Russian gas via Ukraine. Gazprom provides 26% of all the gas consumed in Europe and any disruption can cause serious disruption. The market is too relaxed right now even though they could face a serious crisis. People are currently looking at low demand and high storage levels in Europe at 77% capacity which is why prices are low. If the disruptions were to continue, the gas price will shoot up making the European recession even deeper than what it is. Currently, Russia is sitting in the driver’s seat whose political agenda is to resovietize and given that these countries depend on Russian gas for survival, it is very unlikely that they will condemn Putin for his Ukraine invasion.

As far as India is concerned we are highly energy dependent. We do not want the Russianization of the Eastern Europe and if this continues, we are bound to have an energy crisis of an alarming size. Then, India being a major importer will find itself in an economic mess. It is wise on our to look for alternate sources of energy from all around the world.

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