STOCK MARKET WATCH -- Monday, 3 March 2014

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35. Russia Gas Threat Shows Putin Using Pipes to Press Ukraine

http://www.bloomberg.com/news/2014-03-02/russia-gas-threat-shows-putin-using-pipelines-to-press-ukraine.html

OAO Gazprom (OGZD)’s threat to end natural gas discounts for Ukraine adds to the financial burden on the near-bankrupt government in Kiev and makes Europe’s energy supply part of the escalating crisis.

Russia’s gas-export monopoly said on March 1 it may end last year’s agreement to supply Ukraine at a cheaper rate unless it’s paid $1.55 billion owed for fuel. It’s the first time since the overthrow of pro-Moscow president Viktor Yanukovych last month that Russia has directly used its position as Ukraine’s dominant energy supplier to pressure the new regime.

Vladimir Putin, who has permission from Russian lawmakers to deploy troops to Ukraine, has repeatedly used gas to strong-arm his western neighbor, cutting off supplies twice since 2006 over payment disputes. Because Ukraine hosts a network of Soviet-era pipelines that carry more than half of Russia’s gas exports to the European Union, any disruption of supply puts the region’s energy security at risk.

Gas debt “is a traditional Russian move to pressure Ukraine,” said Mikhail Korchemkin, head of Malvern, Pennsylvania-based East European Gas Analysis. “In the past decade the Kremlin used the gas tap as a tool of political pressure on the former Soviet republics.”