Kyiv and Moscow are playing an endless gas-cut-rate game. Kyiv urges Moscow to play fair and hears in return the only way to solve the problem is complete and quick integration. An ultimatum, loud and clear. Moscow will make no concessions and the price is set: Ukraine’s withdrawal from the WTO; CIS Customs Union membership. Then everything will depend on how Kyiv will behave. There is an alternative. Something makes Moscow interested in Ukraine, precisely its gas transportation system (GTS). Moscow wants it and then it will negotiate. Kyiv might even count on eating crumbs that would fall from the master’s table afterward. What this would mean for Ukraine is clear from the Moldova example. They parted with their GTS, yet the transportation prices are higher than in Ukraine. Lithuania followed suit and now it wants to cancel the deal. That’s comparatively easy, what with Lithuania being backed by the European Union and the 1994 Energy Charter Treaty which this country has to comply with. There are also diversified gas supply options, so Vilnius feels reasonably secure, even though they don’t count on quick and effective talks.
There is no one, nothing Kyiv can count on under the circumstances. I wonder what our Energy and Fuel Minister Yurii Boiko counts on while assuring everyone that a deal with Moscow will be made. I seem to remember him saying during a talk show this spring that a deal would be made this summer. The summer is over, with talks and no results. Winter will come. The fuel supply issue remains to be resolved. Moscow has started discussing another gas war, warning Europe they will have to spend some time without adequate central heating, pointing an accusing finger, of course. This is when one suffers the consequences of the Kharkiv [gas] accords and marginal foreign policy that hasn’t changed since then — except perhaps that it has gotten from bad to worse. How else can one interpret the Ukrainian operetta court hearings and rulings demanding that Russia surrender the Crimean lighthouses? This is more than blackmail, a crazy attempt to turn the knife in the wound of the Russian fleet on the Black Sea, expecting a change of heart at the Kremlin, for them to quickly trade the lighthouses for lower gas prices. Otherwise why the fuss? It doesn’t take Cambridge/Oxford/Harvard cum laude diplomas to figure out the outcome of this venture: nil for Ukraine and another blemish on the Ukrainian cabinet. Yes, Ukraine should have these lighthouses back, but this matter should be handled differently. One can only wonder about the people behind this political show. Couldn’t they see the outcome would be nil? As it is, the lighthouses remain in the so-called lessees’ hands and now Ukraine is faced with Medvedev’s ultimatum.
Russia will not make any concessions in terms of gas prices primarily due to domestic political reasons. They are planning to increase gas prices, as is the case with the electricity bills. They will have parliamentary and presidential elections in December and March, respectively. Although everyone knows the outcome, nobody wants to rock the boat. Ukraine will be granted lower gas prices while these prices will be increased domestically. No problems with Belarus. An ally surrendering its property… Ukraine is another matter. How can you address the Russian people and fail to explain that there is nothing from Ukraine, that it hasn’t given up struggle?
Second. Russia’s Gazprom has customers standing in line in Europe, pressing arbitration charges for lower prices. The monopolist is fighting in court as best it can. How can Gazprom consider lowering gas supply prices for Ukraine under the circumstances? Even if they did, this would serve as precedent for the Italian ENI trial, then for their German, French, Polish, Netherlandian, and other business partners.
Third. There is the strong pressure on the European gas market by spot gas. Even though the overall consumption rate doesn’t show serious growth, the business partners want lower prices and the right to lower extraction rate, discarding the take-or-pay formula. Now this is an even greater hazard for Gazprom, spelling billions of dollars of losses. Who would agree to this, being of sound mind? They have their revenues they want to keep, so they won’t allow anyone to meddle with this influx of hard cash.
Fourth (and most important). There is the imperial Russian mentality, no way to change it, not now anyway. The Kremlin is going ballistic about Georgia precisely because it had the nerve to call it quits with Russia. Saakashvili and his team’s greatest achievement is not in the economic but in the mental domain, getting most of Georgian society to think along different lines. Before long any idea of integration with Russia will cause smiles in official Tbilisi. And so the Kremlin is busy collecting all resources. In this context, Ukraine’s Customs Union membership is a matter of principle. If not now, then perhaps never.
Fifth. A biased factor. The Kremlin banked on Yanukovych, but he ended up in the bad books, worse even than Yushchenko in some respects. The man had to be punished, to make an example others wouldn’t want to emulate, what with Ilham Aliyev [President of Azerbaijan] making waves because of Moscow’s pro-Armenian stand in the Nagorno-Karabakh matter. Karimov, in Tashkent, openly set the ship on Western course. Moldova is all but lost for Russia, which leaves the CIS business going down the drain. One alternative left for replacing this negative trend is dragging Kyiv into the CIS network, by offering “integration” gas price cuts, while teaching Yanukovych a lesson: Don’t do what Moscow wouldn’t like you to do.
Interestingly, all this was previously voiced by Vladimir Putin, so now Medvedev is burdened with the ungratifying task of teaching the neighboring countries a lesson they will remember. Official Kyiv is resisting and this doesn’t make Medvedev any happier, ditto Baku and Tashkent. Meanwhile, the “national leader” [Putin] is scoring points in advance of the presidential campaign, shouldering the heavy yet noble burden of formulating the objectives [of Russia’s domestic and foreign policies], with Medvedev serving as a field officer’s orderly, bringing munitions, taking aim and pulling the trigger as ordered.
The logical question is, How bad is the situation? Russian President Medvedev made it perfectly clear, after meeting with the North Korean dictator, Kim Jong-il, in Ulan-Ude, saying that “unless Ukraine becomes a full-fledged member of the Customs Union, appropriate customs measures will have to be taken in certain cases…” The best response to this would be a firm stand. If the government wants to increase domestic gas extraction to 27 billion m3 and lower Russian supply to 12 billion m3, Ukraine will have use other supply sources. A very ambitious program, if not an attempt to pressure Gazprom. Well, then there is no need to waste time holding fruitless talks. It is necessary to raise funds to pay for more expensive gas, go through this ordeal, and then get rid of that dictatorship, once and for all.
Sounds good, but somehow I can hardly expect our political leadership to act that way. According to Mykhailo Pohrebynsky, director, Kyiv Center for Political and Conflict Studies, and Moscow-based Nezavisimaya gazeta, President Yanukovych has ordered “interesting proposals” for Russia, saying that “appropriate instructions have been issued by the Ukrainian leadership.” If so, then Yurii Boiko’s statements are sheer falsehood. The question is, Whom we are trying to deceive?
