Deja Vu: Russian-Ukrainian Gas Crisis

Monday, 5. January 2009     0 comment(s)
Arkady Moshes
Programme Director - The EU's Eastern Neighbourhood and Russia research programme

It is, actually, very good that Europeans have holidays at the end and not in the beginning of the year. Otherwise some top EU bureaucrats would have to interrupt their vacations, just as their Russian and Ukrainian colleagues do, to deal with yet another energy conflict between Moscow and Kiev - a trouble as habitual and annoying these days as a snowless New Year’s night.

It hardly makes much sense to discuss the origins of the conflict. As always, it is easy to find both economics and politics involved. Russia has a legitimate right to expect a real price for its exports, calculated as European prices minus the cost of transit. It has an easily-readable interest to agree about higher yearly tariffs in anticipation that in the coming months the gas prices will fall, just as Ukraine has an obvious motivation to negotiate a lower price level exactly for the same reason. At the same time it is quite conceivable that Moscow would like to finally punish Ukraine’s Orange leadership for all its “misbehavior”, ranging from the very fact of coming to power in 2004 against Russia’s choice to the alleged sale of weapons to Georgia.

From a Russian perspective, the moment of opportunity is definitely there. Ukraine is lacking a responsible administration. Instead of rallying around the flag, its elites have sunk into a protracted political crisis. On the one hand, this made Ukraine extremely vulnerable to influences from Moscow. On the other hand, it has produced a huge frustration among the country’s sympathizers in the West. The European Union, in its turn, in the aftermath of the war in Georgia has returned to the path of “business almost as usual” in its relations with Russia. It is apparently reluctant to intervene into what it prefers to consider a bilateral business dispute.

The European logic is traditional and understandable. But it’s hardly a winning one, since the EU can only stay above the fray for as long as its gas reserves are not depleted. After that, abstention would not be an option.

Europe’s strategic interest is to secure its energy supplies in the East, which means to secure both production and transit. Theoretically, there is a simple way to do it. European companies should start buying Russian gas on the Russian-Ukrainian border and have separate transit contracts with Ukraine. First, in that case the whole system of the gas trade in the region would become much more transparent. It would be finally possible to get rid of all sorts of murky intermediaries and get full control of the amounts of gas. Second, Ukraine would start receiving a reasonable revenue for its transit services, which it now does not, and could use this revenue to pay for its own imports.

Why isn’t this scheme being even discussed? Why should the Russian Gazprom be held responsible for the transit of gas through the territories of states that have been independent for almost 20 years? One reason must be the traditions of business partnership between big companies. Who would gain from Ukraine obtaining the image of an unreliable transit country and accumulating energy debts? Probably those European partners of Gazprom, who for years have been lobbying for alternative transit routes and striving to become owners of the Ukrainian gas transportation system, isn’t it?

But the other reason is again political. Ukraine’s symbolic inclusion into the EU’s energy security perimeter, as opposed to today’s typically post-Soviet post-imperial arrangement, would inevitably create another conflict between Brussels and Moscow, which the former would apparently like to avoid, all the nice Commission documents about emerging Eastern Partnership, which include Ukraine but not Russia, notwithstanding.

I am certain that the current Russian-Ukrainian gas crisis will be resolved, and probably sooner rather than later. The war of nerves cannot last for ever. But I am no less certain that this is not the last time that the New Year brings us old news.

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