Ukraine Threatens to Block Gas to Europe; Bluff or Stupidity?

Sanction madness has gotten so silly now that Russia may not have the option to play the nuclear card of blocking gas to Europe. Ukraine might play that card first.

Please consider Ukraine May Block All Transit from Russia in Sanctions Row

Ukraine ready to impose sanctions against any transit via its territory, including air flights and gas supplies to Europe, Prime Minister Arseniy Yatsenyuk said Friday.

Kiev has also prepared a list of 172 Russian citizens and 65 companies predominantly Russian to put under sanctions for “sponsoring terrorism, supporting the annexation of Crimea, and violating the territorial integrity of Ukraine,” Yatsenyuk said at a briefing on Friday.

Proposed sanctions include asset freezes, bans on certain enterprises, bans on privatizing state property, refusing to issue licenses, and a complete or partial ban on transit- both aviation and gas.

“We simply have no other choice,” the Prime Minister said, adding that Ukraine will use part of the planned $17 billion IMF aid to achieve energy independence, and may go to the World Bank for help. The country, which is on the brink of economic default, received the first $3.2 billion tranche in May.

Ukraine wants to “put a stop” to its gas dependence on Russia, its main source for energy to heat homes and buildings, but understands it will not be an “easy” process, Yatsenyuk told reporters.

The Prime Minister estimates Ukraine could stand to lose $7 billion as a result of imposing sectorial sanctions against Russia, its biggest trading partner after the European Union.

If approved, a halt to Russian gas transit would hit Europe as the continent gets 15 percent of the energy it needs from Russia. In June Gazprom, Russia’s national gas company announced it was stopping deliveries to Ukraine, but would continue to ship 180 billion cubic meters of gas to Europe.

The falling out with Russia’s gas major over pricing and debt has forced Ukraine to cut back on its heavy use of energy. Until the winter, homes will go without hot water to cut gas consumption by 30 percent.

On top of that, Ukraine is also exploring reverse flow options; importing gas from neighboring European countries.