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Ukraine Crisis Update

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Tensions continue in Ukraine with several developments that have spooked the markets. Both Russia and Ukraine continue their antagonising actions against each other.

Recently the Ukrainian government passed a law that allows foreign operators the right to “the management and/or concession or lease” of the pipelines and underground storage facilities. Currently the infrastructure is dominated by Russia; this new law allows US and European investors to take greater control of Ukraine’s infrastructure who have become a strong ally to Ukraine.

Adding to the tensions, Russia and Ukraine have been at loggerheads for days over a convoy of 280 Russian trucks carrying water, food and medicine. It was despatched by Moscow bound for eastern Ukraine but has been parked up for several days in Russia near the border. Kiev has said the convoy could be a Trojan Horse for Russia to get weapons to the rebels, a notion that Moscow has dismissed as absurd. It said the aid is desperately needed by civilians left without water and power and under constant bombardment from the Ukrainian advance.

Ukrainian forces are pushing forwards in efforts to crush pro-Moscow separatists. They have raised their national flag over a police station in the city of Luhansk that was for months under rebel control, Kiev said on Sunday.

The impact on gas prices is due to the uncertainty over transit volumes from Russia via Ukraine, while this supply risk continues to be priced in future contracts. This sentiment has dragged the prompt upwards, despite the switch to an over-supplied system. Conditions remain volatile, with a further depreciation in sterling against the Euro supporting prices further out.


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