Just a week into 2009, the new Cold War between Washington and Moscow got a whole lot colder. What seemed like a minor dispute between Moscow's gas conglomerate Gazprom and its Ukrainian counterpart quickly evolved into a major energy and political crisis, leaving much of Europe without heat during an unusually cold snap.
About 80% of Russian natural gas exports are routed through pipelines in the Ukraine. There have been numerous disputes involving payment between Moscow and Kiev since the 1990s, but the prices of gas and transit appeared to have been settled by a 2002 contract. Following the "Orange revolution" in 2004, however, the disputes continued. The latest crisis began when Gazprom announced it would stop deliveries to the Ukrainian market on January 1 until Ukraine paid its past due bills.
Deliveries to Europe resumed for the next few days, but on January 7, Orthodox Christmas by the Julian calendar, Moscow initiated a complete shutdown, accusing Ukraine of siphoning off gas intended for Europe. Kiev has denied this, even as it argues that it has the right to take a percentage of the gas in lieu of transit fees, pursuant to an earlier contract.
Although the contracts, agreements and technical treaties present a confusing tangle in trying to determine which side is in the right, the current gas dispute is fundamentally political in nature, and goes beyond the relations between Moscow and Kiev, all the way to Brussels and Washington.
Using the techniques developed in 2000 to subvert Serbia, Washington organized a "democratic revolution" in Kiev in late 2004, ousting the pro-Russian government and installing a client regime under Viktor Yushchenko. From that point on, the US has tried to integrate Ukraine and Georgia which had a similar "revolution" in 2003 into NATO, over European objections.
In August 2008, Georgian troops attacked the enclave of South Ossetia, prompting a Russian response. Within days, the US-trained and equipped Georgian army had ceased to exist. Kiev reeled from the events in Georgia, with Yushchenko staying steadfastly loyal to Washington while his PM, Yulia Tymoshenko, argued for a more pragmatic relationship with Moscow. This led to a crisis in the government, and for a while it looked as if Yushchenko could find himself out in the cold. Eventually, however, the two made up and resumed their uneasy partnership.
Now, Yushchenko's approval rating is worse than that of Bush the Lesser. He does, however, enjoy the full support of Washington. Not only has he remained loyal to the people who brought him to power in what was essentially a coup, he is even married to a former State Department official.
A Washington Post report from January 6 reveals interesting details about Yushchenko's role in the current crisis. Apparently, there is a great deal of infighting between him and Tymoshenko, in preparation for presidential elections next year:
" the most notable point in the agreement was a decision to eliminate the role of shadowy middleman company RosUkrEnergo in Ukraine's purchases of gas from Russia. Tymoshenko has described the firm as a vehicle for corruption for Yushchenko."
The Post also reveals that Ukraine has been unable to pay for gas even at below-market prices, "running up a debt of $1.5 billion and $600 million in disputed late fees as the economy tumbled in the autumn."
Could it be that Yushchenko, realizing he has nothing to lose, deliberately opted for a confrontation with Moscow, in hopes it would boost his popularity at home? Certainly, a crisis serves the interests of his sponsors in Washington. As Jonathan Stern of the Oxford Institute for Energy Studies tells the Post, "Everything about this dispute is negative for the Russians And if everyone blames the Russians, Ukraine has nothing to lose."
Charters, Declarations and Treaties
To some extent, the gambit is working. Between the mainstream media in the West and their subsidiaries in client states (such as Serbia), resentment over the gas outage in the unusually freezing European winter is directed primarily at Moscow.
A prime example is a New York Times "analysis" from January 14. Not surprisingly, it blames the crisis on Moscow, quoting only Ukrainian officials; the one Russian quoted said that Moscow was prolonging the crisis through technicalities. Only after asserting repeatedly that this was Moscow's way of browbeating the "pro-Western" regime of Viktor Yushchenko into obedience did the NYT reporter mention an allegation made by Gazprom deputy CEO that Ukraine was acting on orders from the US, pursuant to a December energy agreement between Kiev and Washington. This was followed up by a dismissal from the American Embassy, calling the charge "baseless."
But is it?
The "Charter on Strategic Partnership" only says that "the parties intend to work closely together on rehabilitating and modernizing the capacity of Ukraine's gas transit infrastructure," but in the following paragraph there is talk of a "Bilateral Energy Security Working Group" that would "enhance a trilateral dialogue with the European Union on enhanced energy security" consistent with the "US-EU Summit Declaration of June 10, 2008."
Here is the relevant section of the said Declaration (emphasis added):
"On energy security, the EU and the US underline the importance of increasing competition in energy markets and promoting market-based solutions to diversify the development and transit of energy resources to the global market, including full implementation of the G8 St. Petersburg principles. We will work together with Ukraine to increase the transparency and efficiency of its energy markets and support international efforts to rehabilitate and modernize its transit networks. We will facilitate regional cooperation on energy with the countries of the Black Sea, the Caspian Basin and Central Asia and Iraq, and encourage the development of multiple pipelines, such as the Nabucco and Turkey-Greece-Italy projects, to supply additional natural gas to Europe from diversified sources."
Canadian network CBC reported on January 13 that, "EU officials said the crisis should encourage a search for independent energy sources and supply routes, such as the US-backed Nabucco pipeline that would carry Caspian energy resources circumventing Russia."
Gas Politics, Balkans to Baltics
The trouble with Nabucco and the TGI is that they are very expensive projects that exist only on paper. So, for that matter, does Russia's proposed "South Stream" pipeline, except that it got a considerable viability boost with Gazprom's purchase of Serbia's oil and gas industry. The sale was negotiated back in 2007, and throughout 2008 the new Serbian regime, fiercely devoted to Brussels and Washington, tried to sabotage it, without success. Gazprom and Belgrade finalized the deal in December 2008.
However, pressure from the EU to scuttle the deal continues. Nor is Serbia the only country targeted for intimidation; Bulgaria and Greece have also angered Brussels and Washington by signing on to South Stream. A credible Serbian analyst speculates that because of this, the governments in Sofia and Athens might even be replaced by more obedient regimes before the end of the spring.
Nor is the bullying limited to client regimes in the Balkans. In September, the US ambassador to Sweden seriously annoyed both the Swedes and the Germans with a rather undiplomatic op-ed concerning the proposed North Stream pipeline. Such tone was previously the sole province of Imperial gauleiters in Belgrade.
On January 10, it appeared a compromise might be in the works, with EU observers actually stationed at transit points to oversee the flow of gas. However, Moscow was outraged at a "declaration" Kiev appended to the agreement, and declared the deal void. As of January 14, gas deliveries to Europe have not resumed. Ukraine simply refuses to transport gas to Europe unless it gets some for its own consumption first (CBC).
To resolve any mystery, one must seek the motive. Cui bono?
The present crisis is no boon for Moscow, which may eventually force Kiev to cough up the debt payment, but at the expense of rising anti-Russian sentiment in Europe. Yet even if Yushchenko and his Imperial handlers may have succeeded in making Russia look bad, Imperial policymakers still have to learn that perception only has so much impact on reality. And the reality is that Russia is still the cheapest and most efficient supplier of energy to Europe, while Nabucco, TGI, and those "alternate" sources of gas and energy remain pardon the pun pipe dreams. The current crisis may even lead to blowback, compelling Moscow to get more involved in Ukraine, if only to ensure that a hostile government doesn't interfere with its gas exports in the future.
Once again, it's the ordinary people freezing in their homes, and businesses forced to shut down, that bear the brunt of power politics. And 2009 has only just begun.