Ukraine Potpourri: “Referendum” Results, Natural Gas Lines To Europe, More Ground Escalation, Putin’s Threat To NASA

Lots has happened in Ukraine since my last update on the crisis, and there’s plenty to talk about. This past Sunday was election day in two eastern Ukrainian regions- Luhansk and Donetsk, where only one question was brought before their voting citizens on their ballot: Do you support the declaration of state independence of the [Donetsk People’s Republic or Luhansk People’s Republic] ? In other words, the people of each reason, were deciding whether to be ruled by the central Ukrainian government in Kiev or declare their independence and desire to be ruled by Russia. Without any independent election monitors on the ground, ninety percent of voters in Donetsk and ninety-six percent of voters in Luhansk voted in favor of independence from Ukraine, and thus allegiance to Russia.

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Even with the plethora of reports of Kiev’s crackdown on the separatists on Referendum day, which left at least two civilians dead, many feared turnout would be low for these votes. They couldn’t have been more wrong. In both regions, the turnout was close to seventy-five percent according to the central election commission and media reports.

In response to the votes, the Obama administration through State Department spokeswoman Jennifer Psaki’s written statement, reject the integrity of the vote, arguing that they in fact violate international law and the territorial integrity of Ukraine:

“If these referendums go forward, they will violate international law and the territorial integrity of Ukraine…The United States will not recognize the results of these illegal referendums…in addition, we are disappointed that the Russian government has not used its influence to forestall these referenda since President Putin’s suggestion May 7 that they be postponed, when he also claimed that Russian forces were pulling back from the Ukrainian border…The Russian leadership must know that if it continues to destabilize eastern Ukraine and disrupt this month’s presidential election, we will move quickly to impose greater costs on Russia.” 

These votes were not overseen by independent observers, that watch for fraud, intimidation, and other associated mischief.  According to sources, armed Russian-backed separatists oversaw the autonomy votes in the two regions, and violence had been reported allover the country on referendum including multiple reports that the Chief of Police in the town of Mariupol was hanged publicly near the airport, by pro Russian separatists.  Just as a reminder, the death penalty has all been outlawed in every European country (minus Belarus)  including Russia. Ukraine, abolished the death penalty in 2000.  According to The Interpreter Magazine, Valery Adruschuk, was abducted by Separatists during the outbreak of violence last week, and had been “tried by a show court and sentenced to death” for ordering his men to fire on citizens:

“The People’s court”, as an special judicial body with the rights of a military tribunal, sentenced Valery Nikolyevich Andruschuk to the supreme penalty. The sentence was carried out on an aspen tree in the woodland on the northern outskirts of Mariupol by soldiers from the ‘May 2 Remembrance ‘ battalion of the Lugansk People’s Army.

Referendum Over, Now What and What About Those Gas Lines? 

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The crisis continues and continues to snowball. As I opined in my last post on the happenings in Ukraine, this military conflict is mostly a propaganda war between the Russians and the West- and it continues to be just that. Since the referenda, the United States has instituted another batch of targeted sanctions upon Russia’s oligarchs, which have done nothing to tone down the situation. In response, Putin has vowed to ban American astronauts from accessing the International Space Station (ISS) after 2020, a move that could cripple the already hurting American space program. As you may know, the Obama administration has pushed for NASA to move to a private sector based operation and thus relies on hitching rides on Russian rockets to get to space. The ground war in Ukraine between the separatists and the central Kiev government is ongoing and worsening. Reports of Ukrainian planes being shot down by Russian separatists and continued heavy fighting in the city of Salvyansk that includes the deaths of many civilians.

 

As we’ve previously reported, Ukraine is essentially the superhighway of natural gas lines from Russia to the rest of the European continent, thus the flow of oil and gas plays a mightily important role in the ongoing crisis in the region.  Even before the Crimea invasion, Russia had been waging a trade war with Ukraine with Russia carrying the most leverage as they are the main supplier of natural gas not only to Ukraine but piped through the Former Soviet Republic, to supply to the rest of Europe as well.  Since the crisis in Ukraine began, Russia has gouged the price for natural gas for Kieve, thus throwing gasoline on an open flame. To make matters worse,  during the past week, Russia announced that Ukraine would have to pre- pay for its natural gas starting in June of this year. From an ABC Report: 

Putin first warned of the move in April in a letter to European leaders whose nations are customers of Russian state-controlled Gazprom natural gas giant. He said that Moscow would switch to pre-paid deliveries if Ukraine, which serves as a major conduit for Russian gas supplies to Europe, failed to start settling its mounting gas debt.

In the second letter released by the Kremlin Thursday, Putin said that a meeting involving Russian, Ukrainian and the European Union officials has failed to settle the issue. He said that Ukraine’s gas debt to Russia has kept rising and reached $3.5 billion, even though Ukraine has received $3.2 billion bailout from the International Monetary Fund. “Given the circumstances, the Russian company has issued an advance invoice for gas deliveries to Ukraine, which is completely in accordance with the contract, and after June 1 gas deliveries will be limited to the amount prepaid by the Ukrainian company,” Putin said in the letter.

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If this manages to come to fruition, the result would be a major ripple effect across the European continent that very well may spill over in the US Markets as well.  However, Russia depends as much if not more on those exports of natural gas as the Europeans depend on the imports in the wake of US Shale gas production, so this is a major conundrum for the Russian leader. Thus, Putin is already looking to other country’s to fix his nations major budgetary concerns– the Chinese.  From a QZ.com report:

Putin appears to have blinked in his negotiations with China, as the Ukraine crisis has given Europe even more reasons to diversify away from Russia. In a report to clients, political risk firm Eurasia Group says it expects a deal—if it closes—to price out at current European rates of $10 to $11 per 1,000 cubic feet of gasGiven the cost of pipeline construction, Gazprom requires at least $12 per 1,000 cubic feet to break evenThe gap will likely be closed through China’s usual method of a gargantuan up-front payment…Despite the disappointing price Putin will reportedly receive, he intends to proceed with a long-sought, 30-year gas purchase agreement—sending 38 billion cubic meters a year to China starting in 2018—in a May 20-21 visit to Shanghai.

In the wake of Putin’s dealings with the Chinese, I’ll be looking for new of a some sort of gas deal with the Ukrainian government. There are already reports of Putin offering Ukraine a new gas deal that hinges on the payment of past fast debts, but some question its fairness.  According to Reuters, Russia will begin discussions on a new gas deal if Ukraine pays off its $2.24 billion debt owed since April 1st of this year though have not said clearly what the new price for the gas will be.  During this crisis, they have jacked up the price of natural gas nearly 80%, so any new deal wont be seen as progress unless fair prices are restored.
As the propaganda war and ground war continue to escalate and the politics of natural gas continue to heat up, our coverage of the Ukraine Crisis will has continue. If this crisis continue to escalate and the flow of natural gas to Eastern Europe is disrupted, the result could be market turmoil, and utter chaos in throughout Europe. But, given the Russian’s need for those exports, I don’t see Putin going down this route, only threatening to, especially if the purported deal with the Chinese is legit.
 As always thanks for reading,
JS
@JustinSnyderFL

One comment

  1. […] energy company Gazprom which happns to be Russia’s largest gas producer.  I’ve previously written about Gazprom, in reference to their supplying of roughly one-third of Europe’s entire […]

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