What a Difference a Decade Makes

Putin puppet and official Russian Presidential seat warmer Dmitry Medvedev has issued an imminent shut off notice to Ukraine gas consumers:

President Dmitry Medvedev told Ukraine on Wednesday to pay its gas debts “to the last ruble” or face the prospect of sanctions from Moscow against its wider economy.

His comments came after Russian energy giant Gazprom on Wednesday warned Ukraine it would cut gas deliveries on January 1 if a new contract were not signed for 2009 and the debts for 2008 not paid back in full.

“The money must be paid until the last ruble if they do not want their economy to be hit by demands and sanctions from the Russian Federation,” he said in an end-of-year interview on Russian television.

We cannot carry on like this. They should just pay up.”

If the consequences of these threats were not so dangerous it would be comic listening to a Russian lecture others on the requirement to make good on debts in the very year we celebrate the Tenth Anniversary of the Russian Debt Default of 1998, one of the lowlights of which was the Russian’s refusal to have an audience with then Deputy Treasury Secretary Lawrence Summers:

Investors’ perceptions of Russia’s economic Stability continued to decline when Lawrence Summers, one of America’s top international-finance officials, was denied a meeting with Kiriyenko while in Russia. An inexperienced aide determined that Summer’s title, Deputy Secretary of the Treasury, was unworthy of Kiriyenko’s audience and the two never met.

Recent events suggest that the Russian hard ball position with Ukraine is déjà vu all over again and President elect Obama needs to pay close attention to this problem if he is to prevent a catastrophe of Georgian proportions. The run up to the 1998 Russian debt crisis included a collapse of the (Russian)stock market concurrent with a collapse in energy prices. Sound familiar?

The collapse of worldwide energy prices will bring an entirely different set of issues to be confronted by the new administration, few of which were openly debated in the election. A desperate and potentially bankrupt Russian state is a problem that it is orders of magnitude greater than anything Obama has opined on to date.

With truces like that who needs intifadas?
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