I heard the story on the radio and then saw it at Newser.com: “Russia Cuts Off Gas Supply to Ukraine.”
Relations between Russia and Ukraine are set to slide even further downhill after Kiev and Moscow failed to make a breakthrough in a bitter dispute over natural gas, with Russia today cutting the gas supply to the country. Russian gas exporter Gazprom says the deadline for Ukraine to pay a debt of nearly $2 billion passed at 2am ET, Reuters reports, and “gas supplies to Ukraine have been reduced to zero,” Ukraine’s energy minister confirmed. He says the country can make do without Russian gas until December. The state-owned gas firm, which jacked up the price of gas it sells to Ukraine by 40% in April, rejected Kiev’s offer to pay $1 billion now and the rest in monthly installments. Going forward, Gazprom says it will demand that Ukraine pay in advance for any future deliveries.
It is not surprising that Ukraine is accusing Russia of aggression for refusing to extend more credit to sell gas. But I think Russia’s explanation makes a lot of sense, even if they also have more underhanded motives. The conflict gives us a frightening picture of the future as more nations, including eventually the United States, are not able to borrow anymore.
While I understand there are a lot of reasons to suspect Russian motives, it isn’t unreasonable to expect a merchant to stop extending credit to a customer who cannot pay old bills. Ukraine is an economic basket case. People have complained about the possibility of bailing out the Ukraine because it would mean bailing out Russia. So it is no secret that Russia has been loaning Ukraine money for Ukraine to use to purchase fuel from Russia. This scheme had to come to an end sometime.
What about when China stops loaning us money (i.e. buying our treasuries)? Are we going to listen to leaders who say that this is an intentional move to destroy the country?
It would be much better to work to rebuild the economy without adding international hostility to our other problems. But I’m afraid scapegoating is human nature.