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Jim Letourneau's Blog

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Free Market Consequences for Ukraine

Ukraine is facing free market realities tonight as Russia has turned off their natural gas. The natural gas pipeline running from Russia through the Ukraine reaches all the way to the United Kingdom so this disagreement threatens Western Europe’s natural gas supplies.



The US State Department has weighed in with "Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure" 



It is almost reflexive to paint Russia in a negative light but Putin is simply using an effective strategy borrowed from MasterBlaster in Beyond the Thunderdomeembargo on, who run Bartertown?, lift embargo. This incident will prompt Western Europe to pressure and/or assist the Ukraine into paying the market rate for natural gas which is what Putin wanted in the first place.



Sam Birdwater's plight in Americathon comes to mind....God knows I am a patriot. I loaned the country 400 Billion. And I want my 400 Billion back. Does that make me a bad guy? I've got to eat too, you know! So I'm giving the President until the end of September this year to pay me back, or I'll be forced to foreclose. What can I do? I've got to eat too, you know! Does that make me a bad guy?



Russia doesn’t appear to be asking for retroactive compensation so putting politics aside, It doesn’t seem reasonable to expect Russia to subsidize Ukraine’s natural gas consumption.