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Ukraine: winter of gas pain?

Thursday, September 11, 2014 - 02:12

Profits at Russian gas producer Gazprom fall 41 percent on cheaper prices for Ukraine and a weak rouble. As David Pollard reports, the results come as Poland complains its gas supply from Russia has been reduced in a bid to stop re-exports to Ukraine.

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It's a long wait - but the food does come. Emergency stocks of cooking oil, flour and tea make things a bit better for these refugees from the fighting in Donetsk and Luhansk. Life in Ukraine is hard - it could be harder if Moscow puts a stranglehold on gas imports from European neighbours. Like Poland, for whom Russia has reduced supply - by as much as 45 per cent. It means Poland can't now re-export gas to Ukraine. News of the move also reached the European Commission. SOUNDBITE (English) EU COMMISSION SPOKESPERSON, MARLENE HOLZNER, SAYING: "We have (been) informed indeed by the Polish authorities that there is a reduction of gas flows from Russia and we have also been informed that the Polish authorities are now looking into the cause, whether it is of a commercial nature, or of a technical nature." Ukraine needs around 50 billion cubic metres of gas a year. Russia cut off direct exports last June, so re-exported Russian gas from Poland, Hungary and Slovakia - so-called 'reverse flows' - is crucial. Poland has been singled out first, it seems, because of its hawkish stance against Moscow. The recent ceasefire in Ukraine shows signs of holding. But a new package of EU sanctions - reportedly aimed at Russia's energy sector - is still on the table. With implications for everyone, says Michael Leister of Commerzbank. SOUNDBITE (English) MICHAEL LEISTER, SENIOR RATES STRATEGIST. COMMERZBANK: ''You just look at how large and how important the energy sector is in Russia in terms of size the economy and, you know, share in GDP. It's obviously a major or significant risk and then in turn when you think of the potential retaliation or, you know, these sort of tit-for-tat that we had been having for some time it's clearly a risk that it feeds back, especially into euro area growth.'' Russia's energy giant Gazprom is already caught in the feedback loop. Its latest numbers show quarterly profits down 41 per cent. A gas cut-off to Europe would hurt it badly. While Ukraine, its economy - and its refugees - may be facing the prospect of a long and bitter winter.

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Ukraine: winter of gas pain?

Thursday, September 11, 2014 - 02:12