Russia and Ukraine: Energy Battle, Round 2.5

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The dispute between Russia and Ukraine over natural gas prices is following the same path as the fracas three years ago. Ukraine paid off part of its outstanding $2 billion gas bill yesterday, but the disagreement now centers on the price Russia’s Gazprom wants Ukraine to pay for gas in 2009.

In 2006, Ukraine siphoned off Russian gas traveling through pipelines running through Ukraine. The country is threatening to do the same thing again. Ukraine’s argument this time is slightly different: the gas flowing through the pipeline is uncontracted, therefore it has no owner. If that’s the case, the gas could be confiscated.

About 80% of Russia’s natural gas exports to Europe runs through Ukraine. Russia is building pipelines both north and south of Ukraine in order to diminish its need to rely on the Ukrainians, but those pipelines are billions of dollars and some years away from completion.

The Ukrainians, and most Western observers, believe Russia is trying once again to influence Ukrainian politics and move Ukraine back into the Russian sphere of influence. Ukraine’s president is no friend of the Russians, and Russia would like to see him go. A substantial hike in the price of natural gas could accomplish that goal.

Russia has been trying since 2005 to regain the hold it once held over its ‘near abroad’, countries like Ukraine that the old Soviet Union regarded as satellites. Now is a good time to press this issue. The intervention in Georgia last summer was a calculated move to determine how the West would react. US and European reaction was noisy, but not meaningful.

The incoming US president has many more things to worry about than natural gas pipelines through Ukraine. European governments will fail to unite behind a single plan because some countries, like Germany, depend very heavily on Russian energy and won’t do anything to jeopardize those supplies.

A new Cold War is not likely to start over the Russia-Ukraine dispute, any more than it started over the Russian intervention in Georgia. The US will need soon to face the fact that Russia plans to increase its influence in both Eastern Europe and Central Asia. What the US and the West can do about that doesn’t appear to be much.

Paul Ausick