I’m sitting in our Baltimore office on the fourth floor of a beautiful historic building. The blinds are up, and I’m watching flurries float down in the grey of winter.

A lovely scene that I’m sure I’d appreciate much more if I wasn’t so darn cold…

I arrived at work this morning to a near-empty building, a single coworker hanging around to tell folks that the heat is broken, and that most of our publishing crew has headed down to the local coffee shop, Donna’s, to get warm.

I’ve spent my morning shivering over a quickly cooling cup of coffee as a pounded out my article for Taipan Insider for tomorrow.

I figured I’d wait it out. They said they were fixing the heat, but that was about two and a half hours ago, and now my fingers feel like they’ve been making snowballs for, well, for about two and a half hours.

This must be what it feels like in Eastern Europe right about now. Gas from Russia is still not flowing right, after 19 days. There’s a deal on the table that all parties are expected to sign, if their cold hands can grip a pen.

Right now, it’s 37 degrees in Prague, with a chance of snow tonight. It’s 30 here in Baltimore, and as I’ve said, we’ve already got the flurries…

Stay warm, folks.

First, I want to say that I really enjoy hearing from our readers. I will always invite your comments, questions and criticism.

On Wednesday, I shared with you some comments about an article I wrote on Russia’s natural gas monoploy, and this stand-off between Russia and Ukraine.

I was lucky enough to get a comment from a gentleman with some specific insight into the situation. I’m posting it here for you all to read, and again, feel free to comment if you wish…

Hi Sara,

I have family in Ukraine, and several growing small business’s and I am in the country maybe every two months for extended periods.

I can tell you that the political and emotional situation is very dire. This is a country that has been under the rule of the USSR for a very long time, and the people have an outlook that is not quite in tune with our, free democratic outlook. Corruption at all levels is widespread and a normal course of doing business. This extends to the political elite who view the privilege of power as a route to obtain vast back handers and favours. They are in power supported by the people with money and not by their political accumin or skill, nor for that matter their great passion to reform and build a sophisticated country.

Continue Reading »

I’m hard at work on a couple new reports, and on planning my next trip, so in the meantime, I thought I’d share with you some thoughts from a Taipan Publishing Group subscriber living in Poland.

He saw my report for Taipan Insider, talking about the ongoing natural gas conflict between Russia and Ukraine. Here’s how the email string took me from Ukraine back to Poland, where I’d recently visited on a previous trip…

Hi Sandy Franks,

I wish to comment on todays Taipan Insider. The map showing gas pipes in Europe is not correct and the shown dependency on Russian gas is also wrong.

There is a very high dependency on Russion gas in the Baltic States as well as in Finland.

The map doesn’t show gas pipes running from Russia through Ukraine and Belarus via Poland to Germany. The gas shipments through the pipe via Ukraine through Poland to Germany was halted completely but the shipments via Belarus through Poland to Germany were in fact increased by 12%. This, however, did not compensate for the lack of gas via Ukraine. Poland therefore halted major plants consuming large amounts of gas, such as chemical and petrochemical industries.

Anyway, the interesting part of this whole story is how it is possible that European leaders did not learn from the previous closing of the gas taps a few years ago. How could they rely on Russia for the European energy supply? How could they let Europe become hostage and subject to the unstable behaviour of Russia? Hasn’t history taught us anything?

Best regards,
P. [XXX]
Poland

***

Hello, P.,

That map was from the BBC. I don’t think it was meant to show every pipeline, just the ones affected by this mess between Russia and Ukraine, and the percentage quote was also taken from the BBC, and it refers to the percentage of Russian gas imports that pass through Ukraine, not all imports.

I should have been more clear on that, and I’ll make sure to mention it in our next Taipan Insider.

Here are links to the supporting articles from the BBC, should you care to look through them:

http://news.bbc.co.uk/2/hi/europe/7814743.stm
http://news.bbc.co.uk/2/hi/europe/7808465.stm

Both the map and the percentage quote come from the first link.

We seem to be on the same page, though with questioning why the EU hasn’t thrown itself into pipeline projects bypassing Russia.

By the way, how is Poland holding up in this global economic crisis? Have you seen any drastic measures being taken? I was there back in September, just at the start of things, so I haven’t seen first hand how the country’s being affected.

Thanks for writing in…

Cheers,

Sara Nunnally

***

Hi Sara,

The momentum of growth kept Poland going through the fall but now the steam seems to have evaporated.

I think Poland is in for a nasty surprise in 2009. Somehow the government and the central bank seem to believe that Poland will not see any recession but just a reduction in the growth rate. This is in stark contrast to what is going on in the markets. With the PLN down substantially during the last month, the cost of imports will of course be hit and since Poland is relying a lot on these imports, this will in my opinion weigh down the markets more than seems to be expected.

Furthermore, exports are falling despite the cheaper Zloty as demand around in EU and elsewhere dries up. Manufacturers started laying off workers a few months ago and this trend is continuing. The housing market has come to a standstill and credits are very hard to get and very expensive (commercial credits carry margins of 3,5-5% now). The Central Bank has been reluctant to reduce the base rate - it is still at 5%.

What I believe will surprise everybody here in the months to come will be a sharp increase in defaults and bankruptcies even among large companies. This could further reduce the access to credits and thereby worsen the situation.

I don’t see any decisive action from the government. There are basically no commitments in terms of support packages. Polish politics has a tendency to react when it is too late. First we watch the patient die, then we discuss for half a year what could have been done.

I am in fact Danish so my perspective here is different although I have been in Poland for almost 20 years (and am fluent in Polish).

Should you have any questions about Poland in the future, feel free to send me a mail and I will see if I have any comments you may or may not use.

Regards
P.

Just another perspective on the global financial crisis. Thank, P., for your comments. If you have any comments for me, just send them along!

The two problems we’ve been focusing on this past week both had false endings.

Last week, we were told that Israel and Gaza were talking about a cease-fire. Now, news reports have more Israeli troops pushing into Gaza City. More than 90,000 people have left their homes, and an estmated 900 people have died in the conflict.

We were also expecting Russia to begin shipping natural gas supplies through Ukraine again this morning. That hasn’t happened either. Russia is now claiming that Ukraine is purposefully blocking supplies. Hundreds of thousands of people have been without gas for a full week.

So, what happens next? Some analysts are saying the Israeli-Palestine conflict could go on for some time. But some Gaza survivors have been without water for four days and the humanitarian situation is worsening by the minute.

Russia will only begin pumping large amounts of natural gas if EU monitors determine that Ukraine isn’t stealing any for domestic consumption. This test of the taps has put the “truce” back at square one.

Natural gas sold on the NYMEX has been dropping for the past five trading days. But natural gas sold on London’s ICE ended higher today. The spread between WTI oil and ICE Brent crude oil is about $6.50, most likely due to these two conflicts.

So Europe is paying more for oil and gas as Russia and Ukraine lock horns, and as Israel continues to pound the Gaza Strip. We’re just starting to get into the middle of winter, too.

Yesterday, I told you Prague was going to hit an overnight low of 15 degreed F. Right now, it’s 9:00pm, and it feels like 12 degrees F.