Community News

Tuesday, January 20, 2009

Ruble Hits 11-year Low As Russia Accelerates Devaluation

By Don Miller
Contributing Writer
Money Morning

Tuesday, January 20th, 2009

The Russian ruble fell yesterday (Monday) to levels not seen since the 1998 banking crisis, as the nation’s central bank devalued the currency for the sixth time in seven days. The devaluation is seen as a sign of further deterioration in the Russian economy and comes despite government efforts to orchestrate an orderly retreat.

A drop in the price of oil, the war in Georgia, and a gas-export dispute with the Ukraine have put a huge dent in the Russian economy, which now teeters on the verge of recession. The devaluations reflect the new reality of low prices and falling demand for oil and other exportable commodities.

In order to contain the damage, the central bank is accelerating the ruble’s slide. Policymakers devalued the ruble every trading day last week except for Tuesday (Jan. 13), letting it fall an average 1.7% a day versus a basket of currencies. By comparison, November and December averaged two devaluations a week, according to Bloomberg News data.

In order to cushion the ruble’s fall, Russia has spent $245 billion since August, as policymakers sold over a quarter of the country’s gold and foreign-currency reserves. That has some economists calling for a free-float or a big devaluation to avoid depleting all of the reserves. Russia’s reserves, the world’s third largest, stood at $426.5 billion on Jan. 9, according to BNP Paribas SA.

Russia is intervening in the currency markets to prevent sharp swings that move people to withdraw their savings. Prime Minister Vladimir Putin pledged last month to use the nation’s foreign-exchange reserves to prevent huge moves and to promote calm in the Russian heartland.

Investors have reacted by pulling back from the currency.

“Fear of another devaluation means nobody wants to buy rubles right now,” Lars Rasmussen, an emerging markets analyst in Copenhagen at Danske Bank A/S told Bloomberg News. “The ruble has begun to look more and more overvalued because of the fall in the oil price.”

Meanwhile, downward spiraling oil prices continue to exert pressure on the overall economy. Russia’s main oil export, Urals crude, has declined 69% to $44.43 a barrel from record highs in July. Analysts estimate the price needs to reach $70 a barrel for the government to balance the budget this year.

The government wants desperately to avoid another run on the central bank, like the one in 1998, when investors fled the market by selling rubles and Russian assets. That crisis forced Russia to spend its foreign reserves to defend the ruble, further eroding investor confidence and undermining the currency. Eventually, the ruble fell 71% against the dollar before finally stabilizing after the government defaulted on $40 billion of debt.

Despite government efforts, there are signs that remembrances of the 1998 crisis are spurring people to sell rubles.

“Of course I have changed my savings into foreign currency. I don’t want to lose my wealth,” Alexei, a Russian banker, told Reuters outside an exchange point in snowy central Moscow. Others were busy changing money into dollars in anticipation of increasing prices for food and medicine.

Banks and companies are also hoarding foreign currencies, Evgeny Nadorshin, senior economist at Moscow’s Trust Investment Bank, told Bloomberg.

“All the attention of the people is focused on the Forex market,” Nadorshin said. “Companies aren’t buying supplies, they’re investing their rubles in dollars instead because the play is too attractive.”

But some analysts believe the devaluations may soon be over. As the cost of money rises, and supply tightens, policymakers may be forced to halt the ruble devaluation. Russia’s Moscow Prime rate, the average interest rate banks charge to lend money to each other, rose to a two-month high of 12.5% yesterday, Bloomberg reported.

Mark Mobius, the well-known globetrotting investor and the executive chairman at Templeton Asset Management Ltd., said he expects Russia’s currency will begin to stabilize, meaning the central bank may slow devaluations as the ruble approaches fair value.

“It’s not as overvalued as it was,” said Mobius, who manages more than $24 billion in emerging-market assets. “I know some commentators think further devaluations can be expected, but I’m not too sure about that.”

Russia, Ukraine sign gas deal, end standoff

By Nataliya Vasilyeva, Associated Press Writer
Monday January 19, 5:38 pm ET

Russia, Ukraine sign gas deal, paving way to end cutoff of natural gas shipments to Europe

MOSCOW (AP) -- Russia and Ukraine pledged to restore natural gas supplies to Europe after signing deals Monday to end a bitter dispute that led to a chilling two-week cutoff of shipments.

Europeans, who normally get about one-fifth of their gas from Russia via Ukrainian pipelines, anxiously awaited for the fuel to start flowing.

Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Tymoshenko signed the documents at Putin's government headquarters on the Moscow river. They resulted from an outline agreement they had clinched in late-night talks Sunday as heads of Russia's state-run natural gas monopoly Gazprom and the Ukraine's Naftogaz.

"As a result of intensive and lengthy talks we have reached agreement on all issues concerning natural gas supply to Ukraine and its transit to Europe," Putin said. He said Gazprom had been instructed to resume shipments bound for Europe that had been halted since Jan. 7 as Moscow and Kiev argued over 2009 gas prices and allegations that Ukraine was stealing gas destined for Europe.

Tymoshenko said the gas would be pumped toward Europe as soon as it enters the Ukrainian pipes. But neither official said exactly when the gas would begin flowing.

Officials said the restored gas shipments could take up to 36 hours to cross Ukraine, which is the size of France, and reach European customers.

EU officials were taking a wait and see attitude.

"We now need an indication of the precise time that gas deliveries will be resumed. Our monitors will verify when the gas actually starts to flow," the European Commission said.

Europe gets about 20 percent of its total natural gas needs from Russia via Ukrainian pipelines, and the cutoff hit hard at some countries, such as Bulgaria and Slovakia, that rely almost entirely on Russia for gas. In the Balkans and other eastern European nations, the crisis has shut factories and left millions of people to shiver in unheated homes.

The confrontation has deeply shaken Europeans' trust in both Russia and Ukraine as reliable energy suppliers -- something each has repeatedly insisted it is, while blaming the other for the supply cutoff.

More than 15 nations have been forced to scramble for alternative sources of energy. The dispute was further complicated by geopolitical struggles over Ukraine's future and over lucrative export routes for the energy riches of the former Soviet Union.

Before dawn Sunday, Tymoshenko and Putin negotiated a preliminary deal for Ukraine to get gas with a 20 percent discount from this year's average European price, which Russia says is $450 per 1,000 cubic meters. That would double the price Ukraine paid in 2008.

However, natural gas prices for Europe are expected to fall sharply later this year, due to the reduction in oil prices. By midsummer, Ukraine could be paying as little as $150 for 1,000 cubic meters, said Ronald Smith, a strategist at Moscow's Alfa Bank.

Russia, meanwhile, will not have to pay Ukraine higher transit prices to use its pipelines this year. Putin said in 2010, Ukraine will have to pay full price for Russian gas, and Russia will pay market prices for transit.

Tymoshenko said the deal would save Ukraine billions of dollars. But there was no celebration in the camp of her political rival, President Viktor Yushchenko.

Citing Monday's deal, Yushchenko's energy adviser Bohdan Sokolovsky said Ukraine will pay $360 per 1,000 cubic meters in the first quarter of this year, and then a lower price. He said the average price for 2009 should be $235-$240 -- still a significant increase from the $179.50 it paid last year.

Sokolovsky said Ukraine was giving more than it was getting out of the deal. He said that by continuing to pay last year's transit fee of $1.70 per 100 kilometers, Russia was getting a 60 percent discount -- as opposed to a 20 percent reduction for Ukraine.

"This is not a symmetric approach," he told the AP.

Sokolovsky said Ukraine will face major economic difficulties as a result of the price increase. "This will be a difficult phase, but I hope a temporary one."

Associated Press writers Yuras Karmanau and Maria Danilova in Kiev, Ukraine, and Jim Heintz and Steve Gutterman in Moscow contributed to this report.

Thursday, January 8, 2009

Russia, Ukraine falter on resuming gas for Europe

January 8, 2008

By Lynn Berry, Associated Press Writer

Russia's Vladimir Putin blames Ukraine for gas dispute; Europe shivers but no end in sight

NOVO-OGARYOVO, Russia (AP) -- Prime Minister Vladimir Putin accused the European Union of moving too slowly to help negotiate an end to the gas dispute between Russia and Ukraine, as a deal to dispatch EU pipeline monitors appeared to unravel Thursday.

EU governments criticized both countries, saying it was unacceptable to see homes unheated, businesses closing and schools shut down due to gas shortages because neither Russia nor Ukraine could stick to its supply contracts.

The chiefs of Russia's state-controlled gas monopoly Gazprom and Ukraine's Naftogaz held talks Thursday for the first time since negotiations collapsed on New Year's Eve over 2009 gas prices. Russia said it was willing to resume pumping natural gas to Europe through Ukrainian pipelines as soon as monitors were in place to verify the gas flow.

But a deal to send international monitors unraveled late Thursday over Gazprom's insistence that Russians be among the observers in Ukraine. Kiev had agreed to EU monitors, not Russians.

"This is an issue between Russia and Ukraine," said EU Energy Commissioner Andris Piebalgs.

But Gazprom stuck to its position, and Putin urged the EU to resolve the situation.

"Our European partners must act quickly in these unusual conditions," Putin told journalists at his residence outside Moscow.

Russia stopped all natural gas supplies to Ukraine on Jan. 1 but kept supplies flowing to Europe through Ukraine's pipelines until Wednesday, when all deliveries stopped. Russia accused Ukraine of siphoning off gas intended for European customers. Ukraine denies this.

Gazprom and Naftogaz continued to blame each other during visits Thursday to Brussels. But Gazprom CEO Alexei Miller and Naftogaz's Oleh Dubina returned together to Russia to continue talks.

Miller suggested that countries that believe they have suffered from the gas cutoff could sue Ukraine. Ukrainian officials alleged Russia was trying to destroy Naftogaz and the Ukrainian economy during the global financial meltdown.

Putin said Ukraine must pay the current European price for natural gas, which is more than twice what Ukraine paid last year. Russia then would agree to double the fee it pays to ship that gas over Ukrainian pipelines to Europe, he said.

Only by moving to a transparent market arrangement, Putin said, can Russia and Ukraine prevent a repeat of the gas dispute that has led to a shutoff of Russian gas supplies to more than a dozen countries.

Putin blamed Ukraine's political infighting and what he described as high-level corruption for the failure to reach a deal.

Europeans were reluctant to get drawn in.

"The EU is not going to take sides," said European Commission diplomat Gunnar Wiegand.

Europe depends on Russia for one-quarter of its natural gas, and about 80 percent of that is shipped through pipelines crossing Ukraine. Other smaller pipelines run through Belarus and Turkey.

At least 15 nations -- Austria, Bulgaria, Bosnia, Croatia, the Czech Republic, France, Greece, Hungary, Italy, Macedonia, Romania, Serbia, Slovakia, Slovenia and Turkey -- all reported a halt in Russian gas shipments by Wednesday. Germany and Poland also reported substantial drops in supplies.

The gas dispute came amid a major cold snap. At least 11 people have frozen to death this week in Europe, including 10 people in Poland, where temperatures sunk to minus 13 degrees Fahrenheit (minus 25 Celsius ).

The lack of heat was wearing on many, especially in eastern Europe. Angry Bulgarians protested in front of the Ukrainian Embassy in Sofia on Thursday, holding signs "We are not hostages" and accusing Russia and Ukraine of being "gas terrorists."

Orthodox priests fired up wood-burning stoves in Bulgaria to keep their churches warm, while residents of the capital blew on their hands as they rode unheated trams.

In Bosnia, which does not have any gas reserves, woodcutters braved below-freezing temperatures as people turned to their fireplaces or stoves for heat.

Manufacturers in Bulgaria, Hungary, and Slovakia were slammed by government-decreed gas rationing or outright shortages. Bulgarian Economy Minister Petar Dimitrov said 152 companies have reported losses totaling euro4.3 million ($5.9 million) per day.

Slovakia, which declared a state of emergency, ordered 1,000 companies across the country to reduce gas consumption so that homes, hospitals and schools could get heat.

In Hungary, power plants were asked to switch from gas to other fuels, mainly oil or even coal, and rationing was blamed for scores of factory closings, including carmaker Magyar Suzuki, Canadian train manufacturer Bombardier and even Pick, makers of Hungary's most famous salami.

Hungary also said it would sell natural gas Thursday to neighboring Serbia, where the heating situation was even worse.

Associated Press writers Aoife White and Raf Casert in Brussels, Belgium, and Maria Danilova in Kiev, Ukraine contributed to this story.

Gazprom refuses to agree to EU gas monitoring plan

January 8, 2009

By Tara Patel and Daryna Krasnolutska

Jan. 8 (Bloomberg) -- OAO Gazprom, Russia’s natural-gas exporter, will resume fuel shipments to Europe through Ukraine as soon as international monitors are deployed, Chief Executive Officer Alexei Miller said.

Ten EU companies agreed to join a committee to monitor flows of Russian gas through Ukraine, Miller told reporters in Brussels today. Russia is prepared to double the fee it pays to send gas through Ukraine, Prime Minister Vladimir Putin said.

Since a previous dispute over gas prices in 2006, European nations have diversified their sources of fuel and improved inventories. They are also using more gas, the source of 24 percent of the world’s energy in 2007, to reduce emissions linked to global warming. Gazprom suspended transit flows yesterday after accusing Ukraine of siphoning off gas destined for other buyers, a charge denied by Kiev.

“Gas will start to flow again fairly soon,” said Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy. “Both Russia and Ukraine want cash and they know that if no gas is flowing they won’t get paid.”

Both Miller and his counterpart at NAK Naftogaz Ukrainy, Oleh Dubina, flew to Brussels today as the European Union sought to broker an end to the dispute that’s affected supplies to at least 20 nations. Miller said they would both take the same plane back.

‘Totally Crazy’

Describing the current situation as “totally crazy,” Miller said the priority is to “resume prompt deliveries via Ukraine so gas can reach European consumers.”

Naftogaz said it’s ready to “guarantee 100 percent” of Russian gas transit supplies to Europe. Ukraine’s Deputy Prime Minister Hryhoriy Nemyrya said EU monitors will arrive in the country tomorrow.

Russia is ready to pay $3.40 per 1,000 cubic meters of gas over 100 kilometers (62 miles), up from $1.70, Putin told reporters today. Moscow had previously rejected higher charges.

Russian President Dmitry Medvedev spoke with his Ukrainian counterpart Viktor Yushchenko by phone yesterday, the first high-level contact between the two sides since negotiations broke off on Dec. 31. Medvedev said Ukraine should pay the full market price for its gas and clear its debt with Russia. Each side blamed the other for the shutdown of the transit route.

Ruble, Hryvnia Rally

Russia’s ruble and Ukraine’s hryvnia rallied against the euro following the resumption of talks.

French President Nicolas Sarkozy and German Chancellor Angela Merkel urged Russia to renew shipments of gas to Europe. Russia must “respect” its contractual commitments, Sarkozy told a joint press conference in Paris today. “Russia has to hold to its obligations,” Merkel said.

Gazprom’s European customers receive 80 percent of supplies through pipelines that cross Ukraine. The Russian exporter, which provides a quarter of Europe’s gas, said its overall deliveries to Europe were cut by about 60 percent yesterday.

“Russia’s motivation isn’t exclusively financial,” David Hauner, a London-based economist at Bank of America Corp., said in a Bloomberg Television interview today. “In this tough time for the Russian government, with lower oil prices and a weaker ruble, they want to show strength. That always comes across well with the public.”

Supply Shortfalls

Ukraine, Romania, Bulgaria, Greece, Turkey, Macedonia, Serbia, Czech Republic, Slovakia, Bosnia-Herzegovina, Slovenia, Austria, Hungary, Italy, Croatia, Moldova, Turkey, Poland, Germany and France have all registered supply shortfalls since the cutoff.

The market is still “broadly pricing in a near-term solution to the crisis,” UniCredit SpA said today in an e- mailed note. Industrial stoppages “would spread relatively rapidly if gas supplies remain limited,” it added.

Bulgaria may be “at risk” with regard to gas reserves, with levels at less than 10 days of average consumption, UniCredit said.

RWE Transgas, the Czech Republic’s biggest natural-gas trading company, said domestic fuel supplies remain sufficient even as supplies from Russia remain stopped for a second day.

Hungary partially lifted gas use restrictions though it said it would reimpose them if needed, according to a statement from Mol Nyrt., the country’s biggest refiner.

OMV AG, Austria’s largest oil and gas producer, said today it’s still not receiving gas from Russia.

Italy has enough gas reserves for the next two months and the country relies less on imports from Gazprom than others in Europe, Edison SpA Chief Executive Officer Umberto Quadrino was cited as telling Il Giornale in an interview.

No Gas

Ukraine’s gas transportation system is stable and no gas is arriving from Russia, Naftogaz Deputy Chief Executive Officer Volodymyr Trikolich said. Naftogaz is supplying gas only to customers in Ukraine, he told a press conference today in Kiev.

Gazprom delivered about 170 million cubic meters of gas to Europe yesterday, compared with 420 million to 450 million cubic meters a day normally, Deputy Chief Executive Officer Alexander Medvedev said on a conference call yesterday. Gas is being supplied through Belarus and from underground storage.

In 2006, Russia turned off all Ukrainian gas exports for three days, causing volumes to fall in the European Union, and also cut shipments by 50 percent last March during a debt spat.

Russia cut shipments intended for Ukraine’s domestic market Jan. 1, and accused Ukraine of siphoning off gas destined for other buyers. Gazprom has warned that Ukraine risks amassing a debt of “billions of dollars” if the conflict continues.

Raised Demands

Gazprom raised its demands on Jan. 4 as Miller cited a possible price of $450 per 1,000 cubic meters for deliveries to Ukraine, reflecting the average price in countries bordering Russia’s neighbor. Ukraine, which paid $179.50 for Russian gas last year, rejected a Gazprom offer last week of $250 for 2009 and says $201 would be fair.

Gazprom is still owed $615 million by Ukraine, Medvedev said earlier this week in London.

Ukraine’s political leaders, Yushchenko and Prime Minister Yulia Timoshenko, are grappling with a financial crisis that has forced it to seek a $16.4 billion International Monetary Fund bailout.

The ruble gained 2.9 percent to 40.3863 per euro in limited holiday trading today, from 41.6079 yesterday, in Moscow. The hryvnia increased 2.3 percent per euro to 11.1372, from 11.4155 yesterday.

Tuesday, January 6, 2009

Behind the Russia-Ukraine Gas Conflict

Economics and politics drove Gazprom's decision to shut off gas to its neighbor

5 January 2009

By Miriam Elder

It has become a New Year's tradition: With the clock inching closer to midnight, Russia and Ukraine trade threats and accusations as talks over the next year's gas contract come down to the wire. The two neighbors squabble over the price Ukraine will pay for Russian gas—and the tariffs Russia will pay Ukraine for the use of pipelines that cross its territory, sending Russian gas to Europe.

Only once before did the situation get so dire that Gazprom GAZP.RTS, Russia's state-run gas monopoly, followed through on threats to turn off the taps. That was in January 2006, when Russia sought to hike prices sharply in the wake of the Orange Revolution that ushered a Western-leaning government into power in Kiev. But once again, Gazprom cut gas transmission to its Ukraine market on New Year's Day, arguing that Naftogaz, Ukraine's state-run gas company, had failed to pay its gas bill in full and that talks on a price for 2009 had stalled completely.

What's behind the dispute? Gazprom maintains that the conflict is purely commercial. In fact, both economic and political considerations are at play in both countries. That makes it likely the fight will drag on for several days or longer—in contrast to 2006, when the neighbors found a resolution within three days. Coming less than five months after Russia's heavy-handed war with Georgia, the dispute will surely raise questions about Russia's intentions toward its ex-Soviet neighbors, as well as its ability to reliably supply gas to Europe. The European Union imports about a quarter of its gas from Russia, and 80% of that amount travels through pipelines that cross Ukraine. The conflict with Ukraine also comes at a time when Russia has been trying to increase its sway among global oil and gas players, regularly attending OPEC meetings and floating the idea of setting up an OPEC-style group for the global gas industry.

Ukraine's paralyzed politics

The stakes are high. "There is potentially a lot more at stake here than just money," says Chris Weafer, chief strategist at UralSib, a Moscow investment bank. "Russia needs to win the PR war on this issue as much as it needs the higher price." Russia, he says, needs the EU to help fund new projects in the Arctic and East Siberia, which are costly because of the difficult environmental conditions but necessary to boost Russia's lagging production. "Russia will not be able to do that alone and will need the EU both as a customer and an investor," Weafer adds.

Both Russia and Ukraine have been hit hard by the global financial crisis. Ukraine is one of the few countries that appealed to the International Monetary Fund for help, taking a $16 billion loan in November. Its currency has lost half its value since September, its economy is in deep recession, and thousands face layoffs as its mining industry grinds to a halt. The government, plagued by infighting between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko, is paralyzed.

This state of affairs hasn't been lost on Russia, whose own economic miracle has been jeopardized as the financial crisis spreads to the real economy. The country's financial markets have lost three-fourths of their value since August. Industrial production slowed by 8.7% in November—the most since the 1998 financial crisis. And the ruble has lost over 15% of its value in a managed devaluation that has squandered over $160 billion in foreign reserves since mid-November. Russian officials expect economic growth, which averaged 7% over the past five years, to dip to 2% this year.

A Nationalist Distraction

Gazprom itself is mired in debt, and was recently included on a list of companies eligible for a government bailout. ts shares, which once valued the company at over $300 billion, making it the world's third largest, have fallen 76% since the financial crisis hit in September.

Eager to distract an increasingly worried population from the problems at home, Russia has filled the airwaves of state-run television with anti-Ukrainian propaganda. Yearend programs wrapping up 2008 gave equal coverage to political discontent in Ukraine as to the war with Georgia. One program ran a 10-minute profile of a Ukrainian man who spent the last year building life-sized dolls of Yushchenko and Tymoshenko and placing them in coffins. For its part, Gazprom has appeared eager to capitalize on Ukraine's political instability to get a better deal.

This year's row began in December, when Gazprom accused Naftogaz of failing to pay a $2 billion debt for gas delivered in 2008, precluding the start of negotiations on a contract for gas delivery in 2009. Naftogaz disputed the debt, finally caving in on Dec. 30 and taking loans from state banks to cover the payment. On New Year's Eve, Gazprom acknowledged that Naftogaz had transferred the payment to RosUkrEnergo, a middleman gas trader it half owns, but the funds had yet to appear on the company's accounts in Moscow. Further, Gazprom charged that Ukraine still owes $600 million in fines. Gazprom has also accused Naftogaz of threatening to siphon gas meant for Europe if the dispute wasn't resolved.
Europe Better Prepared This Time

Naftogaz has publicly denied Gazprom's allegations. But in January 2006, the company did tap pipelines destined for Europe to cover its own shortfalls in the midst of a harsh winter. Supplies dipped across Europe, sparking a loud outcry that pushed Kiev and Moscow to solve the dispute quickly.

This time around, Europe is better prepared. The economic downturn means less demand for gas, and most countries have built up storage capacity and reserves to last through a short disruption. If the dispute drags on for weeks, however, those supplies will run out. Britain, for example, has storage to weather a complete cut in supplies for 10 to 12 days. France and Germany could last as long as two months.

On Jan. 3, Gazprom said it had boosted supplies to Europe through three alternate pipelines that bypass Ukraine. But countries in Central and Eastern Europe are already feeling the crunch. By Jan. 5, Bulgaria, Croatia, the Czech Republic, Greece, Hungary, Poland, Romania, and Turkey already had registered dips in supply. "If the Russian side does not provide more gas [to EU member states] than at the moment, then in around 10 days there could be very serious technical problems," Yushchenko's energy adviser Bogdan Sokolovsky warned at a briefing in Kiev on Jan. 3. While Ukraine argues that it has slightly reduced the flow of gas to maintain pressure in its network. Russia says that its neighbor is stealing gas meant for paying customers in Europe and says it plans to take Naftogaz to international arbitration court in Stockholm.

On Jan. 5, Putin ordered Gazprom to cut supplies through Ukraine by 20%—withholding the 65.3 million cubic meters that Russia alleges Ukraine has illegally siphoned off. Gazprom said it would further increase shipments through alternate pipelines in Belarus, Poland, and Turkey, but they are far smaller than the ones crossing Ukraine.
Plans to Bypass Ukraine

The Czech Republic, which took over the rotating EU presidency on Jan. 1 and has its own tense relationship with Russia, called an extraordinary session of EU envoys on Jan. 5 to address the crisis. But few analysts expect the dispute to be resolved quickly. No talks between Gazprom and Naftogaz are scheduled. And Gazprom has increased the price it wants Ukraine to pay from $250 per thousand cubic meter to $450, compared to the $179.50 it paid in 2008. Ukraine says it can pay as much as $235, but only if Russia agrees to pay more in transit fees for sending gas to Europe. Gazprom argues that Ukraine's leadership has failed to forge a unified position so that it can approach the negotiating table with one voice.

Eventually, Gazprom hopes to solve its annual problem with Ukraine by shipping gas directly to Europe. The company has grand plans to build pipelines that would send gas straight to Germany and through the Balkans to Western Europe. But the economic downturn has cast doubt on these projects. That means Europe will be getting much of its gas via Ukraine for years to come—once full shipments resume.

Prehistoric bird goddess is watching you

Ancient Ukraine was home to vigorous culture that vanished
January 05, 2009
Regina Haggo
The Hamilton Spectator
(Jan 5, 2009)


What: Mysteries of Ancient Ukraine
Where: Royal Ontario Museum, 100 Queen's Park, Toronto
When: Until March 22
Phone: 416-586-8000

Their civilization gave rise to at least one city with about 20,000 inhabitants, and then disappeared.

Their story is familiar to eastern Europeans, but virtually unknown in the West.

The Royal Ontario Museum is changing that with Mysteries of Ancient Ukraine: the Remarkable Trypilian Culture.

This exhibition, a coup for the ROM, showcases more than 250 prehistoric ceramic vessels and statuettes, copper jewellery and tools, many never seen before in North America.

Made about 7,000 to 5,000 years ago, the objects were produced by a civilization known as Trypilian -- some scholars call it Cucuteni -- that flourished northwest of the Black Sea, in present-day Ukraine, Moldova and Romania.

Archeologically, the region is among the best documented in eastern Europe. Vikenty Khvoika began digging there in 1896, about the time other archeological pioneers were discovering the remains of Greek and Trojan civilizations farther south.

The Trypilian treasures are especially rich in large earthenware vessels with animated patterns. Like many of the vessels in this exhibition, a hand-built storage jar (4500-4100 BC) boasts the kind of narrow base that might have been stuck into the ground.

The pot's generous belly is filled with sinuous shapes that bump into and enclose one another. These long thin shapes terminate in rounded forms that resemble snake heads. Simplified snakes were common in the prehistoric art of eastern Europe.

Snakes were linked to the mother earth goddess. Because they regularly shed their skins, snakes are appropriate symbols of death and rebirth.

The human figure appears mostly as statuettes, 10 to 20 centimetres high. An earthenware statuette (circa 3000-2700 BC) depicts a female in an idealized and simplified style. She has a well-rounded head, long neck, wide shoulders, thin waist, big hips and big buttocks.

Small relief circles represent her kneecaps, her navel and her breasts. How interesting that big buttocks and high, small breasts remained a standard of feminine beauty well into the 19th century.

The pubic area is emphasized by a large triangle. Such an emphasis serves as a reminder of feminine fertility and was used by artists for millennia after this.

Her pinched and pointy face looks avian. She is probably a bird goddess, as so many of these early images are. Her triangular arms are probably meant to be wings. Bird goddesses were big on fertility.

You must walk around her. As you do, she seems to be watching you, like an owl. This is because of the way her face and head are modelled. The head is three-sided with one eyehole on each side. So when the viewer moves around her, at least one eye is always visible.

Images of women dominate prehistoric art, but the statuettes in this exhibition also include males, and others have been built into the shape of simplified animals such as boars, bears and bovines.

Regina Haggo is teaching Renaissance Treasures, an introductory course about Italian art in the 14th and 15th centuries, at the Dundas Valley School of Art. You can sign up for Monday or Friday afternoons. Classes start on Jan. 5 and Jan. 9. To register, phone 905-628-6357.

Friday, January 2, 2009

Ukraine pleads gas case to Europe


MOSCOW (AP) — Ukraine sought support Friday in European capitals a day after Russia cut off gas supplies and hardened its stance on prices.

Russia's Foreign Ministry issued a statement saying that it, too, was ready to explain its position in the dispute to Europe, asking for a special session of the European Commission to address the question.

But there were no face-to-face talks between Ukraine and Russia as of late afternoon Friday, a day after Russia's state-controlled energy giant Gazprom cut off gas to Ukraine, saying it had failed to pay an outstanding $2.1 billion bill.

For the moment, the two countries instead fought a public relations war.

A Ukrainian delegation headed by Energy Minister Yuriy Prodan, and including the deputy chief of gas company Naftogaz, Volodymyr Chuprun, visited Prague, the Czech Republic, and Bratislava, Slovakia, on its way to Brussels for meetings with officials.

"Our aim is to explain our position to our European partners on the situation which arose in the gas sphere," Bohdan Sokolovsky, energy adviser to Ukrainian President Viktor Yushchenko, told The Associated Press in a telephone interview from Bratislava. "We are informing them on how the negotiations are going, we are stating our negotiating position."

Sokolovsky said Ukraine was trying to reassure its neighbors that it would not interrupt gas supplies.

"We told them that Ukraine is fulfilling all of its transit obligations and they have no doubts about that," he said.

Russian Deputy Foreign Minister Alexander Grushko said Friday Russia was ready to go to Brussels as well to make its case to the European Union.

Many in the West viewed a 2006 Russian cutoff of gas to Ukraine as an effort to punish Ukraine's political leaders for their pro-Western policies.

That cutoff, which temporarily affected supplies to Europe, also led to accusations that Russia was an unreliable source of energy and led to calls for greater energy independence from Moscow.

This year, Russia has taken pains to paint the conflict as a purely commercial matter, and both countries have pledged they would keep gas flowing through Ukraine's pipeline system to the rest of Europe. As of late Friday afternoon there were no reports of interruptions in shipments beyond Ukraine.

Despite the apparent absence of talks, there seemed to be little sense of urgency. Experts say both Ukraine and Europe have significant stockpiles of gas.

Germany's E.ON Ruhrgas utility said it had seen no disruption to Russian gas deliveries as of Friday — although it said any effects would not be noticeable until the beginning next week because of the distance the gas travels.

In any case, "we have nearly 25 percent of our annual needs ... in reserves, so that even if gas volumes from Russia were to be reduced, we are well prepared," German Economy Ministry spokeswoman Beatrix Brodkorb said in Berlin.

Thomas Steg, a spokesman for Chancellor Angela Merkel, called on both sides to "negotiate quickly and constructively" on a new contract.

The cutoff came after Ukraine made a $1.5 billion overdue payment, but Russia demands another $600 million, including $450 million penalties for the late payment for gas shipped in November and December. The two sides also have not agreed on prices for 2009.

Gazprom also wants to charge Ukraine higher gas prices for 2009. Ukraine, meanwhile, says Russia should pay more to ship through its pipelines, which carry 80 percent of the gas Russia sells to European Union customers.

The dispute also reflects strained relations between the two former Soviet nations that developed after Ukraine's 2004 Orange Revolution, which brought a pro-Western government to power.

Ukraine has since sought to join NATO and supported Georgia during its brief war with Russia in August — moves that angered the Kremlin.

The recent decline in energy prices has hit Russia hard, and Gazprom faces a sharp drop in demand for energy.

Experts say efforts to resolve the dispute are also hampered by divisions within Ukraine's leadership. President Yushchenko and Prime Minister Yulia Tymoshenko are bitter political rivals.

At one point Gazprom said it would accept $250 per 1,000 cubic meters of gas, close to the $235 that Ukraine has offered.

But late Thursday Gazprom CEO Alexei Miller toughened his company's stance, resuming an early demand of $418 per thousand cubic meters, the price Russia will charge European customers over the next few months.

Those prices are expected to slide considerably later this year, as the gas market begins to reflect the fall in world oil prices. Last year, Ukraine paid $179.50 per 1,000 cubic meters of gas.

Associated Press writers Maria Danilova in Ukraine, Geir Moulson in Berlin, Lynn Berry in Moscow and Robert Wielaard in Brussels contributed to this report.

Modern Earth Web Design, Winnipeg, Manitoba, Canada