Russia gas dispute runs deeper than pipes, experts say

By Andrew E. Kramer

Wednesday, January 14, 2009
MOSCOW: The feud between Russia and Ukraine over natural gas prices and transit fees has left large swaths of Europe without heat. Yet, what is baffling is that the dispute has always seemed overly technical and easily resolved, if there was the slightest desire on either side. After all, both countries stand to profit from selling fuel to Europe.

The latest agreement collapsed Tuesday, in a familiar cacophony of complaints and countercomplaints, and again over a seemingly trivial issue. With European Union monitors along the pipeline to make sure that Ukraine did not divert any gas for its own use, Russia agreed to resume shipments to Europe.

But rather than repressuring the Ukrainian pipeline system for exports, Russia's gas monopoly, Gazprom, ordered a single test shipment to see if it would pass through Ukraine to Europe, through a pipeline that was being used to supply the Ukrainian city of Odessa. Ukrainian authorities refused, saying they did not want to cut supplies to their own people, and Russia again halted shipments — not, some experts believed, reluctantly.

Political experts say that neither side is motivated to settle the dispute, because it has never been about the stated issues. Instead, it has been a proxy for far more fundamental and insoluble matters, particularly Ukraine's 2004 turn to the West in the "Orange Revolution," which deeply shook Russia's nationalists.

"The Russian side is appealing to a lot of technical details to explain why it still wants the conflict to go on," Vladimir Milov, president of the Institute of Energy Policy in Moscow, and a former deputy energy minister of Russia, said in a telephone interview.

"It's very clear to see the desire to pressure the Ukrainian politicians, and pressure them that if they continue to pursue a pro-Western course and not adhere to the rules imposed by Moscow on the post-Soviet space, they will face difficulties," he said.

Nationalists in Moscow could swallow the loss of the Baltic states and Russia's former colonies in Central Asia, but they will never accept the notion of Ukrainians, nearly half of whom are ethnic Russians, as members of an independent, Western-oriented state, and potentially in NATO, no less.

Some other analysts point to the aftermath of last summer's Georgian conflict as another sticking point, noting that after the war Russia's president, Dmitri Medvedev, had claimed a "privileged sphere of influence" over former Soviet states.

"This is a continuation of the Russian-Georgian war, only by other means," Grigory N. Perepelitsa, director of the Foreign Policy Research Institute, an arm of the Ukrainian Foreign Ministry, said in a telephone interview. "There it was tanks, here it is gas."

This time, though, Europe is suffering as well, with hundreds of thousands of people in southeastern Europe living without heat for six days and factories shutting down in several countries. European officials again implored the two countries to resolve the disagreement.

Pia Ahrenkilde Hansen, a spokeswoman for the European Commission, said: "Little or no gas is currently flowing. We are not at this stage jumping to conclusions. But this situation is obviously very serious and needs to improve rapidly. We do need to get to the bottom of this."

But getting to the bottom of Russia's goals, said Perepelitsa of the Ukrainian Foreign Ministry, goes well beyond the industrial details of gas transit.

Authorities in Moscow are seeking to discredit the Ukrainian leadership and portray Ukraine as a failed state, he said, while demonstrating to Central European nations that have supported Ukraine's membership in NATO that they can freeze if they continue to do so.

Also in play is a deep personal animosity between Russia's prime minister, Vladimir Putin, and Ukraine's president, Viktor Yushchenko.

Yushchenko's face was disfigured in a 2004 poisoning that has never been solved, but for which many in Ukraine reflexively blame Russia. As it did in the disputed enclaves of South Ossetia and Abkhazia before the Georgian war, Moscow has striven to divide Ukraine politically, broadcasting Russian language television into the country, handing out citizenship to ethnic Russians in Crimea and, critics say, backing pro-Russian figures in Urkraine's political establishment.

Russian officials, meanwhile, say Yushchenko has stirred up conflict with Russia to detract attention from his dismal performance on the economy during the financial crisis, and because he has little hope of winning a second term in elections scheduled for December or early next year. They also see the hand of the United States in Ukraine's intransigence.

On Tuesday, Aleksandr Medvedev, Gazprom's deputy chief executive, raised a new allegation, saying that Ukraine had been taking orders from Washington after the United States and Ukraine signed a partnership agreement in December that included a clause on energy cooperation.

Medvedev did not explain why the United States would seek to disrupt relations, not to speak of the gas supply. In a statement, the United States Embassy in Moscow said that the allegation was "baseless."

But the ties between Russia and Ukraine, the two most populous successor states of the Soviet Union, are a tangle of alliances and vendettas, mercurial and often inscrutable. Putin, for example, openly backed Viktor Yanukovich, whom Yushchenko defeated in the 2004 elections after the Orange Revolution protests.

Yet, this year one of the leaders of those protests, Yulia Tymoshenko, seemed to be leaning toward Moscow, refraining for a time from criticizing Russia's war in Georgia.

Indeed, so frustrated were some European Union officials by the latest bad turn in the gas dispute, that some began to speculate privately that the two nations might be colluding to seed chaos on energy markets and drive up the price of the fuel that is their mutual business venture.

Bloomberg News reported Tuesday that the cutoff had caused spot prices in Europe to rise to a three-year high of $8.60 per million BTUs, compared with $5.52 in the United States. With prices expected to fall steeply this year, that could produce at least some welcome pocket change for Gazprom.