Russia Makes Its Move?

After failing to reach an agreement with Ukraine before the new year, at about noon on January 1, Russia slightly lowered the pressure in the gas pipelines to exclude supplies that would normally be sent to Ukraine. However, after the drop in pressure caused a disruption in supplies to Western Europe, Gazprom announced that it was returning the pressure to normal levels. On Sunday, Prime Minister Yurii Yekhanurov confirmed that the pressure levels in Ukraine’s pipelines were about 14% lower, and warned that if gas supplies were not returned to normal levels and the temperature in Ukraine drops below -3 degrees Celsius, Ukraine would begin to retain 15% of the gas transported through its pipelines as a transportation fee. The Ukrainian government has not issued a formal response yet concerning its next move, however, Ukraine has said it was prepared to take its case to an arbitration court in Stockholm. On Monday, the head of the European Union’s Foreign Relations Department, Javier Solana contacted both sides in the conflict and encouraged them to resume talks as soon as possible. Concorde Capital:  The battle is far from over, but Russia?s move was questioned by its customers in Europe, who saw their gas supplies disrupted during the peak winter season, and can be considered a minor victory in the battle for political support. However, unconfirmed reports that Ukraine was not receiving its supplies of Turkmen gas and Ukraine and Gazprom’s duel claims to have bought all of Turkmenistan’s output in 1Q06 do not bode well for the country.