Russia’s Gas War

gazprom_tank1

Five months have gone by since Russia attacked Georgia and surprised many. At that time, analysts spoke about a quest for political power and how the Kremlin needed to re-affirm its old fashioned supremacy over the former soviet satellite.

Now – according to many pundits – the Russian government is seeking money, rather than political power, when dealing with Ukraine in what they call the “Gas war”.

“We are struggling with the consequences of the world economic crisis, but it does not mean that Russian taxpayers have to sacrifice in order to keep Ukrainian production alive,” said Dmitry Peskov, Putin’s mouthpiece.

To put it simply: there is a deal between the Naftogaz Ukraini and the Gazprom according to which the Russians have to sell natural gas to the Ukrainians for 180 dollars every 1000 cubic-meters. With the present economic downturn, though, energy prices are tumbling downwards; and the influence of Moscow as well as its immense reserves of gas is decreasing.

Gazprom now wants all is money back at once. In fact, Ukraine has benefited from a loan of about 2000 billion dollars from Russia and even Kiev has already paid 1500 back; this remains a powerful advantage that Moscow is using in its favor.

Gazprom thinks that a fair price for a 1000 cubic meters of gas would now be 250 dollars, but that is way too much according to Naftogaz’s managers. It is the same ballet every winter, but this time the parties might end up with nothing in their hands. Why? Because on one side you have the usual Ukrainian political stalemate and fussing politicians trying to delay a payment; and on the other side, you have the well known Kremlin establishment wanting more money for the same amount of gas.

But Ukraine has a very high stock-capacity and can count on its own reserves for at least the next three months, long enough to get to the end of this cold European winter and win the chess match in the short run. In the long run, though, Kiev will have to bend over Moscow’s diktat otherwise no more gas.

Bulgaria may lose out as Sofia is not receiving any gas and its citizens are facing the coldest nightmare ever. Other countries in Europe depend on Russia’s gas and this precious commodity is shipped through the underground Ukrainian pipelines. This means that each time Kiev and Moscow are at the odds, the pipelines are shut down and Europe goes cold.

In fact there is a new entry on the stage of this wintertime tale: namely the watchdogs that the European Commission sent to monitor the shipment of natural gas from Russia through Ukraine and Europe. A task force of monitors can actually track the gas and verify who’s who in this gas war. Gazprom and Moscow are blaming Ukraine; Kiev is, instead, passing the responsibilities back to Putin and Medved. The European Commission, using its own resources, wants to see through this political fog.

Want to know what Putin has to say about these monitors? On January 8 he said he did not wish to see a group of monitors descend on Kiev “to sit in hotels and drink horilka”. Clear enough.

“We are ready to admit these [EU] monitors on our territory” continued the Russian Iron Man “…Of course, they also should be stationed on Ukrainian territory and at the stations through which our gas goes out to Europe, at all the major pipelines.”

The Rome based analyst Federico Bordonaro, interviewed by Radio Free Europe said that: “For the moment we lack further details. Official statements only say that they [the watchdogs] will be put at key locations inside Ukraine, but there are no further specifics.

“Of course they will have to monitor whether the gas is actually flowing to Ukraine from Russia, they have to monitor how and when and where the gas leaves Ukraine for European markets,” he added. “For the moment, I think there are still many details that need to be disclosed by the European authorities.”

Recently, the CEO of Naftogaz, Volodymyr Trikolich, told a press conference that “today the negotiations have moved ahead, there has been some progress, but you know that the Russian side has changed its terms several times.”

“We are trying to align all our moves with the Russian Federation in such a way that the contract should be given an objective assessment, that it should be in the interests both of Ukraine and of Russia but that it should by no means be damaging to either side,” he said.

“After the regimes have agreed on the volumes of gas, we will let our counterparts in the West know because we will be in a position to start supplying this gas to its Western consumers in 36 hours’ time.”

The night between January 10th and 11th, an agreement was signed between the EU and Russia and Ukraine. The gas should flow again heading south-west from the pipelines that run under the soil of the former Soviet neighbor. It will take at least another 36 hours before the shivering Europeans will get warmed up again. There is also another problem: the deal between Russia and Ukraine has not been signed yet and this will surely lead to other disputes in the future.

How this will affect American interests is clear enough: if Europeans have to spend their money to survive, how can they possibly think about buying American goods? Helping the EU resolve these issues should be a priority for the White House. The European Union as a political entity still has a long way to go in order to achieve actual power. They are not used to dealing with gargantuan iron-states from the north. We hope the Americans are.

Andrea Loquenzi Holzer and Brittany Christine Toscano

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Andrea Loquenzi Holzer

The truth will set you free

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