Chapter 3 Media Article
"Russia to Restore Europe's Gas", CNN - January 3, 2006
Gazprom, Russia's state-owned natural gas monopoly, has stopped natural gas deliveries to Ukraine for two days. The reason for these halted deliveries is a dispute between Russia and Ukraine over a price increase. Currently being charged at $50 per 1000 cubic metres of natural gas, Russia wants to increase this price to $230 per 1000 cubic metres of gas. However, Ukraine refuses to pay this price, not because it is too expensive, but because they believe that Russia has raised the price so high in an attempt to penalize them for their Western-leaning foreign policy. Ukrainian Foreign Ministry has stated that this has caused economic pressure and is an attempt to destabilize Ukraine's economy by the use of energy to exert political pressure. Although Russia has only stopped its supply to Ukraine, Western Europe has also been affected, noticing reductions in pressure because the pipelines to Western Europe are the same that pass through Ukraine. Ukraine is now accused of stealing gas, but they deny it. As a result, Gazprom has decided to deliver more gas into the gas transport system in order to reach the other countries. The European Commission has arranged to meet this week to discuss contingency plans.
Relation to Chapter 3 - natural monopolies
A third of Ukraine's natural gas is supplied by Gazprom. Another half is supplied by Turkmenistan. If all of Ukraine's natural gas were supplied by a single company(in this case, Gazprom) and the dispute is not solved, then Ukraine would find themselves in pretty much a crisis situation. Their gas supply would eventually run out and temperatures could fall below freezing. Not only homes are affected, but the ability to power industries as well. This is the danger of utilities as a natural monopoly. If for whatever reason, a problem occurs with the distributor, then the whole country would be greatly affected. Another problem with natural monopolies is that some are not controlled by their own countries. If control of the natural monopoly is outside of the given country, they may not have the best interests of the country in mind. Energy security and supplies can become insecure and vulnerable.
Gazprom, Russia's state-owned natural gas monopoly, has stopped natural gas deliveries to Ukraine for two days. The reason for these halted deliveries is a dispute between Russia and Ukraine over a price increase. Currently being charged at $50 per 1000 cubic metres of natural gas, Russia wants to increase this price to $230 per 1000 cubic metres of gas. However, Ukraine refuses to pay this price, not because it is too expensive, but because they believe that Russia has raised the price so high in an attempt to penalize them for their Western-leaning foreign policy. Ukrainian Foreign Ministry has stated that this has caused economic pressure and is an attempt to destabilize Ukraine's economy by the use of energy to exert political pressure. Although Russia has only stopped its supply to Ukraine, Western Europe has also been affected, noticing reductions in pressure because the pipelines to Western Europe are the same that pass through Ukraine. Ukraine is now accused of stealing gas, but they deny it. As a result, Gazprom has decided to deliver more gas into the gas transport system in order to reach the other countries. The European Commission has arranged to meet this week to discuss contingency plans.
Relation to Chapter 3 - natural monopolies
A third of Ukraine's natural gas is supplied by Gazprom. Another half is supplied by Turkmenistan. If all of Ukraine's natural gas were supplied by a single company(in this case, Gazprom) and the dispute is not solved, then Ukraine would find themselves in pretty much a crisis situation. Their gas supply would eventually run out and temperatures could fall below freezing. Not only homes are affected, but the ability to power industries as well. This is the danger of utilities as a natural monopoly. If for whatever reason, a problem occurs with the distributor, then the whole country would be greatly affected. Another problem with natural monopolies is that some are not controlled by their own countries. If control of the natural monopoly is outside of the given country, they may not have the best interests of the country in mind. Energy security and supplies can become insecure and vulnerable.
posted by Susanna Cho at
10:09 p.m.
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