Russia Cuts Off the Gas

The Wall Street Journal leads this morning with news that Russia has cut off the supply of natural gas to Ukraine, reflecting what the paper calls "a jolting reminder of a 2006 cutoff that spread fear in Europe about Moscow's tightening grip on energy supplies." The dispute between Ukraine and Russian gas monopoly OAO Gazprom has been brewing for some time, with Russia trying to exact a higher price and demanding payment for previous shipments that Ukraine insists it has already made.

The Financial Times highlights the international jitters around the situation, including a White House statement issued Thursday "urging both sides to keep in mind the humanitarian implications of any interruption of gas supply in the winter." Since 80 percent of the gas that Western Europe gets from Russia flows through Ukraine, there are fears that supplies could be disrupted elsewhere as in 2006, though the Journal downplays this scenario, noting that "partly because of declining industrial use, both Ukraine and the EU have built up their gas storage, meaning that any immediate disruption to the EU's supplies appears unlikely." The Journal also includes the telling tidbit that this time around Russia wants to get the upper hand in terms of publicity; Gazprom "has retained an American public-relations agency, Ketchum; it is running a dedicated Web site to explain its position; and is holding frequent news conferences."

Even so, the underlying causes of the dispute are unlikely to disappear soon. The New York Times plays up the fact that this time Russia really needs the money. "Plagued by the sharp fall in oil prices, Russia has been scrambling to make up the revenue shortfall as prices have slipped below $40 a barrel. Gazprom, too, is heavily in debt and sinking along with the energy market," the paper reports.

The NYT also features two stories today that spotlight the interdependence of government and business. Louis Uchitelle sums up the state of the steel industry, which just a few years ago was widely touted as enjoying a renaissance, reshaped by tycoons like Wilbur Ross and Lakshmi Mittal. Today, U.S. Steel and other giants are laying off workers, facing declining costs and a slump in demand. Much of 2008 was going pretty well for steel, but as Uchitelle notes, "The steel industry's collapse closely tracks the alarming late-autumn swoon in the national economy." Now steel—like so many others—awaits an Obama administration infrastructure infusion that will create demand for its product. By contrast, it's harder to see a quick fix for the milk industry, which saw a similar drop in prices as the overall economy stalled.

So far, 2009 has seen no slowdown in the burgeoning field of Bernie Madoff news. Relying on the ever-useful "person familiar with the situation," the Journal seems to slightly advance the story that the NYT pursued earlier this week, namely, that investigators are now focused on Madoff's potential use of offshore accounts to further his apparently massive fraud. "[I]nvestigators believe Mr. Madoff had at least one and possibly multiple accounts located in offshore tax havens or locales with robust privacy laws, according to a person familiar with the situation. Such accounts may have been used to hide ill-gotten gains, this person said," the WSJ says. Meanwhile, the Times serves up a menu of juicy personal details about Rene-Thierry Magon de la Villehuchet, the French aristocrat and longtime Madoff associate who committed suicide in Manhattan a few days before Christmas.

Finally, the LA Times appears to be on to a hot story, though it's hard to tell from the details that it has published to date. The paper is reporting that the U.S. Treasury Department's inspector general is asking for a review of the $400 million in bailout money that has gone to City National Bank, Beverly Hills' "bank to the stars." The paper is quick to point out that this is not based on any allegation of wrongdoing by the bank, but rather that "investigators see the review as a case study into how the Treasury Department is implementing" the bailout program. Right, because of the 209 banks that have received federal bailout money, the most typical is the one with almost a fifth of its commercial loans going to the entertainment industry? There is something peculiar here, and we suspect Monday will bring further developments.