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Analysis & Opinion
06.09.11 Fill ‘Er Up
By Andrew Roth

While attention this weekend was focused on a brewing spat over gas contracts between Ukraine and Russia, a different kind of energy crisis took hold at Moscow’s major airports last Friday, when the airports announced that they had the absolute minimum reserves of fuel remaining and may be forced to shut off service if fuel reserves don’t get replenished. Is the cause behind the shortage just another case of profiteering gas companies gearing up for negotiations over pricing, or is the government, with its piecemeal approach to fixing gas crises, starting to step on its own toes?

Two of Moscow’s major airports, Sheremyetevo and Vnukovo, each announced that their gas reserves were dangerously low last Friday, and that they were falling below the mandatory three day supply necessary to sustain operations. As of Monday, the airports announced that fuel supplies had been replenished up to the legal minimums, although there are warnings that further crises could break out soon if long-term steps aren’t taken.

No shortage of suspects has been found for the slow deliveries to the airports, lending a view on the aging infrastructure that supports the production of jet fuel for in Russia. Transneft on Friday accused railways of fomenting the crisis due to issues with fuel deliveries by rail, yet Russian Railways denied the claim, saying that all deliveries of jet fuel had been made promptly and on time.

Ditto for the Russian military, which responded to accusations that it was siphoning off a significant amount of Russia’s jet fuel in a statement to Interfax, claiming that the military only used ten to 12 percent of the country’s fuel production and that demand for fuel at its Moscow Region aerodromes, Chkalovsky and Kubinka, is “tens of times less than that at any Moscow civil air hub,” Major Vladimir Drobyshevsky, a representative of the military command, told the press.

But these accusations were only slight diversions from what many expect is a crisis closely linked with a ploy to raise prices by leading gas producers. With the government taking interest, the General Prosecutor has directed the Federal Anti-Monopoly Agency to investigate the wide gap between demand and supply on the fuel market. “Some 5,000 tons of aviation fuel and lubricants were offered on fuel selling exchanges last week, although the demand stood at around 270,000 tons. On the whole, up to 30,000 to 70,000 tons of aviation fuel are sold on these exchanges every week when the situation is normal,” a source told Interfax last week.

Deputy Prime Minister Igor Sechin held a meeting on Monday that led to an agreement by the government to offer fuel from Russia’s official reserves, which Prime Minister Vladimir Putin agreed to back up in the case of an emergency, Putin’s spokesman Dmitry Peskov told Interfax. “We have to figure out whether there really is a problem with the provision [of fuel], and if there is, then what the reasons for that are,” said Peskov.

This is familiar territory for Putin, who in April of this year attempted to control popular discontent over rising gasoline prices in Siberia by ordering, albeit informally, major gas producers to cut their prices back to reasonable levels. That crisis also entailed a major ban on gasoline products being exported out of the country and to more lucrative markets, in an attempt to force producers to sell their fuel at reduced prices.

Yet uncoordinated government measures have diverted gas refineries from producing jet fuel toward diesel, in order to ensure that the April gas shortages don’t repeat themselves. Moreover, Transportation Minister Igor Levitin accused the Anti-Monopoly Agency of forcing airline companies to play on an unequal playing field. “The Federal Anti-Monopoly Agency required the airline companies to go into the [fuel] market, but there are no offers there,” transport minister Levitin told Interfax, adding that the agency should guarantee the effectiveness of the market.

Gas shortages at the airports are not themselves uncommon, said industry participants, but some of the major producers had simply pushed too hard this year, garnering a government reaction that could lead to greater mandates in the aviation fuel sector. “The situation repeats itself each year at about the same time. Usually the deficit ends only with the next rise of the price by the producers, this time the confluence of all the conditions led to a serious risk of a shutdown in Moscow’s airports,” said Anastasia Matyushina, the official representative of the Aerofuels company, reported Gazeta.ru.
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