What is the true reason behind Putin's gas agreement with Ukraine?

The recent agreement by Putin to open up the gates of gas for Ukraine is, in effect, opening up the gates for Russia to earn money that can try to counter the devastating fall in the price of oil that is having a critical impact on the projected income of Russia, thanks to the current glut of oil on the international market and the increasing effect of sanctions against Russia.

Let's stand back for a minute to examine the simple arithmetic of the dependence of the Russian State Budget on Russia's gas and oil income.

• Over 50% of Russia's spending comes from its earnings from selling oil and gas
• The EU accounts for around 40% of Gazprom sales (Clara Weiss 29 Oct 2014)
• Gazprom sales pay for 25% of the state budget (Clara Weiss 29 Oct 2014) 

Theses figures illustrate, as Carol Matlack has pointed out, that

"Plagued by sagging growth, a weakening currency, and rising capital flight, “Russia needs money from its energy exports more than ever,” Shearing says. And there’s no practical way for Moscow to cut off Ukraine’s supply without hurting European customers that get their deliveries through Ukrainian pipelines."

Professor Stern is Director of Gas Research at the Oxford Institute for Energy Studies

“Without Russian gas, European gas prices would skyrocket. There’d be a massive increase in bills for everybody.” But an abrupt cutoff would be just as dangerous for Moscow, as it nurses a sick economy, Stern says. “It’s the last thing Putin needs.”

Russian President Vladimir Putin holds a meeting with ministers to discusst he situationin Ukraine and natural gas transportation to Europe 

Already there are rumblings in the Kremlin. The Russian Finance Minister, Andre Siluanov, (Nov 2 2014) has said that,

" ...currently Russia simply could not afford such spending ($576 billion on defense in the next six years) and added [that] the finance and defense ministries have already started talks on which programs could be financed from state coffers.. " (my emphasis)

Andre Siluanov

As the price of oil continues on a downward spiral,

" ...Russia will struggle to avoid falling into a recession if oil prices are allowed to drop to $80 a barrel — and could face calamity if prices fall below that level." (Tomas Hirst  of Business Insider Oct 22 2014) (my emphasis)

Oil and Gas Two-thirds of Russian exports

So, is Russia doing Ukraine a favour by coming to an agreement about gas sales to Ukraine? But, more importantly, how are Russia's politician proxies in the EU going to handle a probable catastrophic fall in Russia's income, and the political and social upheaval that this could cause amongst the Russian population? 

It has been screamed from the rooftops that Putin enjoys exceedingly high popularity stakes amongst the Russian people. However, even Putin's Global Propaganda Machine, RT, now has to admit that his popularity has fallen to below 50%.

"After reaching an all-time high in August President Putin’s approval rating has fallen in September according to the latest research. The Kremlin says it is a natural fluctuation." (Oct 28 2014)

Putin's popularity falling (RT)

Is it to counteract this fall in his popularity that Putin has, yet again, sent his bombers towards the UK yesterday (Nov 1 2014), simply to impress the Russian people with his 'macho' image?

Or is it, as I have previously stated, that "Putin needs a war, and he knows it. How else is he going to convince the Russian people to 'tighten their belts' as winter approaches." (cf. my blog 30 Oct) Of what use is it if you are snug in a warm flat but do not have access to the comforts of life to which you have become accustomed? So, even though Putin has said  at the recent Valdai conference in Sochi that, ""Russia has made its choice. To make the economy better we will consolidate society around patriotism and traditional values"

he should be mindful of the fact that the laudable sentiments of 'patriotism and society' simply does not 'butter any parsnips'!

Is it therefore any wonder that, "a range of Russians [at the Valdai Conferecnce] expressed their unease about where all this might be heading. Some feared a return to the Soviet days of restrictions on foreign travel." (Bridget Kendall Diplomatic correspondent, BBC News, Sochi 27 Oct 2014)

If telling his bombers to skirt UK airspace is not enough, the "Czech Republic's Security Information Service (BIS) said on Monday (27 Oct 2014) that Moscow had increased the number of spies working in the country, just days after an alleged Russian submarine was spotted in Swedish waters."
Poland has also recently arrested a Russian spy working for the Russian Military Intelligence, GRU. (31 Oct 2014)

Now we await the fallout from what Putin's proxies in eastern Ukraine will do on Nov 2 2014. These criminal elections that are to be held in eastern Ukraine on 2 Nov 2014 will be a watershed for Putin's belligerence regarding Ukraine.

(to be continued)