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| The Times January 3, 2006
Analysis by Michael Binyon
RUSSIA’S action has caused an immediate political and economic crisis in both Eastern and Western Europe, dramatically underlining the key role energy supplies now play in power politics. But the Kremlin’s action may backfire, damaging long-term relations with the West and throwing into question President Putin’s commitment to stable energy supplies. Ukraine’s attempts to win the backing of Western Europe in a showdown with Moscow are also a high-risk gamble that could leave it isolated, cold and industrially paralysed. The Russian action could not come at a worse time for both President Yushchenko of Ukraine and for President Putin. Russia took over the presidency of the G8 for the first time this year and Mr Putin wants to make energy security the main theme of the annual summit. Already he is under attack in the West for moves to curb democracy; the action by Gazprom will convince Western critics that Russia is unqualified to chair a meeting of industrial democracies. The Kremlin cannot distance itself from the highly politicised decision by Gazprom, the state-owned giant that is increasingly influential in Russian foreign policy. And it must be worried by the immediate reaction of Germany, its main partner in Europe, which said that cutting off the gas could harm economic relations with the West. Investors may now be wary of trusting assurances from the Kremlin and will be concerned that Russia might try to use its muscle in other ways. Despite months of negotiations and clear warnings to Kiev in September by President Putin, the quadrupling of gas prices for Ukraine will be seen by businessmen and Western governments as precipitate and tantamount to blackmail. It will make Europe extremely wary of further increasing its dependence on Russian energy supplies. There could be real doubts in Germany over the proposed new pipeline under the Baltic to bring in Russian gas. Indeed, for the Kremlin, the move may prove as catastrophic as the Arab oil boycott of 1973, which left the West, and America in particular, determined never to be so dangerously reliant again on Arab oil. But Ukraine cannot assume automatic backing from the West. Russia’s argument that it should pay market rates for its gas are powerful, especially as the old price of $50 (Ј29) was absurdly low and the proposed new price of $230 per 1,000 cubic metres is still lower than the rate for Western Europe. Ukraine says, after all, that it is now a market economy. If Ukraine, as Russia claims, has indeed caused the sudden drop in supplies to the West by diverting them into its own network, this will cause uproar. Kiev denies the charge, though it says it will consider tapping into the export pipelines to pay transit costs. Ukraine may also be criticised for turning down President Putin’s offer to delay any cut-off for three months, raising the suspicion that Kiev wants a showdown to highlight the constant pressure by a Russia that strongly opposes its moves to position itself closer to Nato and the EU. It is no secret that the Orange Revolution has run into difficulties, with squabbles and splits in the Yushchenko Government; little would so unite the fractured country as the perception that Russia was trying to freeze it into submission. Ukraine has raised the stakes by threatening to increase the rent for the Russian Navy’s use of Sevastopol, the Black Sea port. At heart, the row centres on deep emotional antipathy on each side. Many Russians are unreconciled to the loss of Ukraine, a Russian province for more than 300 years, and many Ukrainians are still deeply resentful of former Russian domination. The Kremlin’s open backing for Mr Yushchenko’s opponent last year, its anger at the overturning of his initial victory and Ukrainian suspicions of Russian involvement in the poisoning of Mr Yushchenko have further soured relations. |
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