Russia has announced today that Ukraine will not be getting any more gas from it. They couldn’t reach a deal for the supply of gas and so Russia cut the gas. Don’t worry too much about Ukraine for the next couple of months. They have reserves but in the big scheme of things a couple of months of reserves are not exactly much. Ukraine said that it won’t take any of the gas supplied to the EU that’s running through the pipes on its territories.
The question is what does Ukraine do when the reserves run out. Let’s explore the options.
Run out of gas, who needs gas anyway? Well there is industrial gas and retail gas, and a lot of industrial gas will be used in power plants to generate electricity. So some of the electricity goes down, sounds catastrophic but that’s not even the big deal. The big deal is what happens if retail (houses and the like) get cut off. Not much, but what happens when the gas eventually gets reconnected. Now that’s a big deal. Because grandma can’t remember whether she left the gas on or off (the grandma example is borrowed) and what happens when the gas gets reconnected, KABOOM! And since most of us don’t like kabooms the procedure is for a gas man to go check each and every burner point. Yes, that is the procedure, make sure that every gas burner is off before giving the go signal. How many houses are in Ukraine, and how many gas men are there? My guess is it would take more than 5 years, unless they decide that an announcement on TV is enough in which case it will take 5 minutes and some explosion cleanup.
Next is take the EU gas that’s running through. This means that the EU is not happy and if the EU is not happy then no one is happy with Ukraine. It’s not good to steal from your neighbours and make your allies your enemies. There is no way Russia will be pumping more gas to compensate for the theft and this will put the EU in Ukraine’s position of running out of gas, and as we found out no one likes that.
Pay Up. Yeah Ukraine if you are taking gas you should pay for it. Well Russia is abusing that, it has levied late-payment fees on Ukraine for not paying up for the gas they took on time. Russia wants 2 billion pounds sterling and Ukraine said it had paid 1billion which is their gas bill. Sounds like Russia has levied a 1 billion late-payment fee, a bit hefty. Considering the lack of funds available in the world now and the state of Ukraine’s economy another 1 billion is expensive. The main issue here however is that Russia is being a bit of a bully.
So 3 options to look at Run out, Steal and Pay up. Run out = disaster, no electricity, no gas, expensive, dangerous and time-consuming reconnection. Steal = Make your firends your enemies and risk their intervention. Pay Up = losing face big time and telling Russia it is OK to be a bully. As the reserves run out we will find how things evolve. There are of course endless options for creative things to do, so what do you think will happen?
Trackbacks