Fitch Warns Of New European Gas Crisis

According to Fitch Rating service the conditions surrounding the upcoming Ukraine-Russia gas talks make the political landscape ripe for a “perfect storm” that could lead to disruptions in energy supplies to Europe. Among the issues that Fitch listed were Yulia Tymoshenko’s calls to renegotiate the current gas agreement between Ukraine and Russia, Turkmenistan’s demand to up the price for gas at its border to USD 100/tcm and Naftogaz’s lack of gas reserves for the upcoming winter. Meanwhile Tymoshenko announced plans to create an advisory commission with representatives of Ukraine, Russia and 18 European countries to work on the issue. Concorde Capital: Fitch’s concerns are warranted, as both Ukraine and Russia have been ratcheting up the heat on the gas issue. Who is going to ‘win’ this time around depends to a large part on who Ukraine sends to the negotiating table and when these talks take place. The closer to winter the talks begin, the less change Ukraine has of reaching a favorable deal. Tymoshenko’s effort to bring in the Europeans shows she is serious, but we doubt the Europeans would be bold enough to support her. Her main goal should be setting the terms of the agreement over a longer period. Prices will go up in any case.