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12.02.08
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Another Crisis Looms
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By Dmitry Babich
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The two day long visit of the Ukrainian president Viktor Yushchenko to Moscow takes place in a rather tense atmosphere, as disagreement over Ukraine’s possible NATO membership aggravated by a dispute over gas leads to a crisis in relations between Ukraine and Russia. This visit’s failure can bode ill for the projected summit of the presidents of CIS countries reportedly scheduled for February 22, at which the leaders of former Soviet republics are expected to be introduced to Russia’s likeliest future president Dmitry Medvedev. Ukraine, with its population of 47 million, is the second largest member of the CIS, a loose alliance of all post-Soviet countries besides the Baltic republics.
When Yushchenko’s plane lands in Moscow today, the time allocated by Gazprom in its ultimatum to its Ukrainian partner Ukrnaftogaz will already be running out. The Russian company threatened to stop deliveries of natural gas to Ukraine at 6 p.m. Moscow time unless both sides come to an agreement on Ukraine’s debt, whose existence Kiev denies.
The roots of the conflict can be traced back to the Ukrainian parliamentary elections in September 2007. Trying to win the voters’ support, the country’s current prime-minister Yulia Tymoshenko promised to repay the old Soviet debts to Ukrainian citizens, and to lower the price for natural gas coming to Ukraine from Russia and the Central Asian states. After almost three months of wrangling in the Rada (the Ukrainian parliament), a coalition led by the supporters of Tymoshenko and Yushchenko acquired a slim majority of three votes and made Tymoshenko the prime-minister in December 2007.
Having become the prime-minister, Tymoshenko immediately began acting on both of her pre-election promises. President Viktor Yushchenko, clearly concerned by Tymoshenko’s populist moves, said that repaying multi-billion dollar Soviet debts could fuel inflation. The president’s second argument was that the chances of negotiating a better price than $179 per one thousand cubic meters from Gazprom, cajoled out of the Russians by the previous prime-minister Viktor Yanukovich, were very slim.
However, Tymoshenko pressed on with her agenda, pledging to lower the gas prices by removing the intermediary, namely the company RosUkrEnergo, owned on a fifty-fifty basis by Gazprom and the Ukrainian businessman Dmitry Firtash. Created after the gas dispute of 2005-2006, which even led to a brief interruption in Russian gas supplies to Ukraine, RosUkrEnergo (RUE) sells to Ukraine a mixture of Russian and Central Asian gas. Most experts view RUE as an indispensable part of the system of gas supplies to Ukraine.
“I don’t know any country where gas supplies would be made without any intermediaries,” said Konstantin Borodin, director of the Center for Energy Studies, a Kiev-based think tank. “German-Russian WINGAS and Polish PGNiG are also intermediaries and no serious politician wants them removed. Ukraine gets the best price after Belarus for Russian gas, so Ukraine’s demands for a lower price defy logic.”
Ukraine being Russia’s second most privileged partner after Belarus, Gazprom was visibly irritated by Tymoshenko’s rhetoric and made a move to change the situation. On February 8, Gazprom claimed that the gas Ukraine got in January 2008 via RUE was not Central Asian gas but Russian, whose price is not $179 per one thousand cubic meters but $314. According to the company this means that Ukraine owes Russia about $500 million for the 1.5 billion cubic meters already supplied to Ukraine in January. Gazprom demands that the debt be repaid, threatening to cut gas supplies to Ukraine at 6 p.m. on Tuesday if the latter refuses to recognize the debt’s existence.
An official explanation of the interruption in Central Asian gas supplies refers to an extremely cold winter in Turkmenistan, which lead to the country’s own increased energy consumption.
Gazprom’s move is viewed by many as retaliation against Tymoshenko’s unfriendly one. Besides removing RUE, the Ukrainian government claimed that there is a chance for lowering the “gas burden” of the Ukrainian budget by raising the price that Gazprom pays for the transit of its gas via Ukrainian territory. Back in January 2008, Ukrainian state-owned monopoly NaftoGaz suggested raising the transit price from $1.7 per one thousand cubic meters to $9.3.
Ukraine is the main transit route for Russian gas going to Western Europe, with about two thirds of Russian gas supplies to the EU going via the old Soviet-made pipeline through its territory.
“I think the price of $9.3 is a ludicrous invention of NaftoGaz,” said Vladimir Saprykin, the director of energy programs at Kiev-based Razumkov Research Center. “There is no bigger price anywhere in the world. Such a suggestion is damaging Ukraine’s prestige in the world.”
On the eve of Yushchenko’s visit to Moscow, Russian president Vladimir Putin made another gesture which may reveal an important motive for Russia’s toughness on all issues of bilateral relations. On Tuesday, Putin signed a law terminating Russia’s and Ukraine’s joint use of anti-aircraft radar stations on Ukrainian territory.
Unofficially, this move can be seen as an expression of Moscow’s anger over Ukraine’s continued movement towards NATO membership. On January 17, Ukraine’s president Viktor Yushchenko, prime-minister Yulia Tymochenko and the Rada’s chairman Arseny Yatsenyuk sent a letter to NATO’s Secretary General Jaap de Hoop Scheffer, asking him to include Ukraine in NATO’s “action plan” for joining the North Atlantic Alliance at the coming NATO summit in Bucharest in April 2008. The move, which was kept secret from the parliament and was not previously discussed, wrecked havoc in the Rada, where members of the anti-Tymoshenko Party of the Regions started blocking the parliament’s sessions in protest. Since the Party of Regions has the largest faction, the stalemate has continued for several days, with the Ukrainian parliament still unable to resume operations on the day of Yushchenko’s visit.
“Ukraine’s membership in NATO can be very damaging for Russia’s interests, because a number of the former Soviet defense facilities, now needed for ensuring Russia’s security, are located on Ukrainian territory,” said Sergei Karaganov, the chairman of the influential Russian think-tank Council for Foreign and Defense Policy. “The West European and American politicians who are pushing Ukraine toward speedy joining are doing a disservice to themselves and to Ukraine.”
The Ukrainian population is sharply split on the NATO issue, with most of the polls indicating the unwillingness of the majority of Ukraine’s population to see their country as a member of the formerly hostile alliance. |
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