News Blog

09 Mar 2015 | Filed under: Uncategorized

Mr Moffitt’s Profits Times: March Edition

 

Moscow using energy supplies as a political weapon is nothing new

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With about a third of the EU’s oil coming from Russia (40-50% comes through the Ukraine pipeline system). It seems that attempts to diversify supply cannot happen fast enough. Russia’s state-owned gas giant Gazprom shut-off westward deliveries in 2006 and 2009. So I’d be taking Putin’s threats very seriously!

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Will Putin cut off the gas supply?

 
 
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DEFENCE WILL ALWAYS TAKE PRIORITY OVER TRADE

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In my August blog I commented that defence will always take priority over trade. As tensions escalated between Russia and the Ukraine, the EU stepped in to protect their gas supply. In October 2014, the EU brokered a deal worth £2.9 billion between Moscow and Kiev.

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It has still been a difficult winter for the two countries with the Ukraine ceasing supply to a territory held by Russian-backed rebels. The Ukraine government blamed the Soviet-era pipelines which had suffered damage. Putin summarised the situation as ‘smelling of genocide’ at the end of February (given the freezing temperatures). Strong words, but how else could the Russians justify their direct supply to the separatists?

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WHERE ARE WE NOW?

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The October deal expires this month and as the EU prepares to broker a new deal, Russia and the Ukraine are disputing gas supply and payment.

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Russia claims that the Ukraine has fallen behind in making scheduled payments. On 25th February, Putin said ‘The prepayments that have been transferred from Ukraine are enough for another three or four days of gas supplies’ and that ‘If there are no more prepayments then Gazprom will stop supplies in accordance with the contract.’

 
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The counter claim from the Ukraine is that Russia has only supplied 40% of the contracted volumes. Their state-owned energy company, Naftogaz described the Russian statement as blackmail.

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HOW COULD THIS AFFECT GAS PRICES

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Ultimately, Russia needs to export gas more than the EU needs to import it. This suggests that even if Russia does cut the supply, it won’t last long. Many experts see Putin’s behaviour as being part of a wider aim of increasing Russia’s power and influencing the EU over the crisis with the Ukraine. The real risk is not that we could have a gas shortage in 2015 (which would result in prices soaring) but that if the new deal isn’t brokered carefully, the crisis will continue.

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Book a meeting

 
 
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Follow @Mr_Kills_Bills for the latest news

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13th February: RT @TimHalfhead:  EU energy use falls to 20-year low link

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27th February: Charities should pay 5% VAT and no CCL on energy bills. Today, I checked 3 electricity bills for a charity All 3 charged CCL and 20% VAT.

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