Summary
Andrew E. Kramer with contributions from James Kanter in Brussels, Dan Bilefsky in Prague, Sabrina Tavernise in Istanbul and Ellen Barry in Moscow reported in the January 7 issue of the International Herald Tribune that Gazprom halted nearly all natural gas exports to Europe on Tuesday. It is the annual dispute with Ukraine over pricing and delayed payments. Gazprom said it was shipping one fifth of normal exports across Ukraine. Each side blames the other for the shutoff. Vladimir Putin personally ordered the shutoff Monday evening on state television. He has consistently taken a hard line with Ukraine possibly because that nation seeks membership in NATO. Ukraine has paid lower lower costs for gas than other European nations. Gazprom said they planned larger shipments but that Ukraine had blocked two of the three main pipelines. Alexandr Medvedev of Gazprom said the situation was serious and Russia’s reputation as a reliable supplier was jeopardized.
Analysis
Gazprom wants to discontinue using Ukraine pipelines to transport Russian natural gas to customers in the European Union. The desire is based on circumventing the threats by Ukraine to halt shipments. Once the two pipelines are in operation, not expected until at least 2010, Gazprom can ignore Ukraine as a transshipment obstacle. At that time, Ukraine will be totally at the mercy of Gazprom as far as prices are concerned. Will this lead to a complete disintegration of relations between the two states or will Ukraine see the light and return to the Russian orbit? Politicians exist in Ukraine who would willingly return to the Russian fold. But there are not enough of them. Ukraine has been in trouble with Russia since the collapse of the Russian Imperial government in 1917. It briefly existed as an independent state from 1918 to 1922 when it was forced to become part of the Soviet Union. During World War II, many Ukrainians supported Germany with hopes of becoming independent again as a consequence of a German victory. In the event, Germany lost and Josef Stalin retaliated savagely (not for the first time). Stalin engineered a famine in eastern Ukraine in 1932-33. So the hostility is so deep and so imbedded in national memory that there can never be a true amicable cooperation with Russia. The ideal situation would be for Russia and Ukraine to establish normal business relations across the board and indeed, much trade continues between the two. But it is a mistake for Western powers to encourage Ukraine to move further away from Russia. This merely deepens the hostility between Russia and Ukraine and creates suspicion of the West in the mind of Russians. What is needed is an international agreement that sets out the relationship of Ukraine with its neighbors. The nation needs a plan to shore up its economy and create greater wealth so that it can purchase energy supplies. Ukraine produces almost 80,000 bbl/day of crude oil and 19 billion cubic meters of gas annually. With modern technology, these rates could be increased and when supplemented by the abundant coal resources, the country would not have to rely so extensively on imports from Russia. The Chernobyl disaster in 1989 was a setback for the country that still exerts pressure on the economy. But Ukraine is a rich agricultural state and could be an important constituent of the overall European economy. What is needed is rational thinking, bold leadership and a desire to let bygones be bygones. Little chance of any of that happening in the current environment. As things presently stand, Gazprom, the EU and Ukraine are discussing ways to end the impasse. This heralds higher natural gas prices for everyone. It also encourages producers of liquefied natural gas to speed up shipments to Europe. This will be a long-running affair with no permanent solution.
