Russian gas crisis should inform U.S. policy

BY MATT HUTCHINS

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Last month, after the failure of negotiations between Russia and Ukraine over the price of natural gas, a series of murky events led to the second cut-off of gas to Europe through Ukraine in three years. As the winter cold intensified, a state of emergency was declared in many countries in Eastern Europe that rely heavily on natural gas for heat and electricity. In Bulgaria and other heavily dependent nations, the lack of adequate reserves brought industrial activity to a halt and forced leaders to contemplate reactivating decommissioned nuclear reactors. Ukraine hunkered down and began drawing from its large strategic reserve, prepared to wait for Russia to balk, and European Commission President Jose Manuel Barroso accused both parties of failing to make sufficient efforts to reach agreement and immediately worked to install European inspectors at pumping stations. During twelve days of deprivation, Europeans watched as Ukraine and Russia bickered over the cause and solution of the gas dispute. The crisis only came to an end when Ukrainian Prime Minister Yulia Tymoshenko and Russian Prime Minister Vladimir Putin successfully concluded an agreement which fixed the price of gas for Ukraine to the price paid by European nations, less a 20% discount for 2009. This was a major defeat for Ukraine, as it had previously paid only $201 per 1,000 cubic meters of gas and would now pay more than twice as much.

Even after the resolution of the crisis, each nation’s leaders continue to blame the other as the cause of the supply interruption: Ukraine claims that Russia shut off supplies first, and Russia blames Ukraine for stopping its transmission pipeline. The inherent uncertainty in who did what has forced Europe to reevaluate relations with both Russia and Ukraine in an attempt to formulate a stable energy policy. Alternative supply channels that bypass the Ukrainian transit network are looking much more attractive, as are projects like the Nabucco Pipeline which would provide an alternative to Russian gas. While it is tempting to dismiss the dispute between Russia and Ukraine as an instance of bad bilateral relations setting off a series of heightened regional tensions, it remains a fact that if Russia wanted to be a reliable supplier of gas to Europe, it could have resolved its disagreement with the Ukrainians by yielding to their demands. Indeed, Russia has become increasingly brazen in its use of energy reserves as a weapon to fracture alliances and exercise global clout. Any claims by the Russian government that the dispute with Ukraine was purely economic are completely off base. First, Russia lost more income during the twelve days of shut-off to Europe than it stood to make from any renegotiated agreement with Ukraine. Second, it is impossible to dismiss the political nature of Gazprom, the Russian national gas company, when its former head, Dmitry Medvedev was hand-picked by Vladimir Putin to become President of Russia and all negotiations with Ukraine were conducted by Putin himself. Furthermore, it was no accident that Europe bore the greatest burden during this dispute. If anything, the entire crisis was a calculated game of hardball played by Putin and Tymoshenko, with the lives and fortunes of Eastern Europeans at stake, and the Ukrainians could not withstand the pressure.

It is also no accident that the recent events transpired during a virtual power vacuum in the United States. The transition between the Bush and Obama administrations made it almost impossible to exert influence over the events which unfolded, and Ukraine was left without a major strategic ally precisely when it needed support. With Europe pleading for a quick restoration of gas shipments and Russia blaming Ukraine for the situation, Ukraine lacked any rational diplomatic course except a complete concession to Russian demands that it pay the full European rate for its gas.

Almost twenty years after the fall of the Berlin Wall, the political dynamics in Eastern Europe remain incredibly complicated, with dependence on Russian gas serving as the backbone of its relations to former Soviet satellites. American involvement in the region continues to touch off disputes with Russia, a fact which is demonstrated by the recent missile shield dispute. NATO is struggling to find a raison d’etre apart from protecting member states from Russian military aggression, but it seems to be powerless to address the growing threat of aggressive Russian energy policies. Indeed, European NATO members have become increasingly resistant to any further expansion of the alliance which would be antagonistic to Russian interests.

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