Boris Sokolov: An Autopsy of the Gas Wars


The gas war: real peace or just a cease-fire?

By Boris Sokolov

The Russian-Ukrainian gas war appears to be over. Agreements have been signed about the procurement by Ukraine of Russian gas and about its transit to Europe through Ukrainian territory. And Russian gas is finally on its way to Europe.

Now the politicians and the experts are attempting to understand what were the objectives of the parties in the gas war, and who gained the more in it and who – lost. The most well-founded, probably, would be a conclusion about how in the end, everybody lost: Russia, Ukraine, and the European Union. But as to who lost what specifically – that’s something about which discussions are possible.

To begin with, we should try and understand what specific objectiveswere being pursued by Russia, which unleashed this war in the firstplace. There were no doubt both political and economic components toMoscow’s gas game. The political objectives boiled down todestabilizing the already unstable political situation in the Ukraine,to exacerbating the conflict between Viktor Yushchenko and YuliaTymoshenko, and ideally – to achieve the impeachment of Yushchenko andthe return to power in one form or another of Viktor Yanukovich(perhaps, in alliance with Tymoshenko).

The Russian allies from theParty of the Regions in the Supreme Rada were acting according to justsuch a script during the time of the gas crisis. However, nothing ofthis plan worked out, nor could it have. Now, with less than a yearleft until the presidential elections in the Ukraine (and after theseelections, no matter who wins in them, there will almost certainlyfollow a dissolution of parliament and early elections of the SupremeRada), it is not to the Ukrainian political elite’s advantage toreplace Yushchenko, who has no chances of re-election and will mostlikely not run for a second presidential term. But before the start ofa new round of elections in the Ukraine, it is neither to Yushchenko’snor to Tymoshenko’s advantage to form even a temporary tacticalalliance, capable of repelling voters from them in favor of other,perhaps new, parties.

Now, as concerns the contradictions betweenYushchenko and Tymoshenko, it can not be said that they became moreacute with the start of the gas war or that they had any significantimpact on the outcome of the gas conflict. Of course, it ranklesYushchenko that the agreement about settling mutual gas claims wassigned by Tymoshenko. Therefore, from the presidential structures isheard criticism to the address of the Russian-Ukrainian gas agreement,ostensibly disadvantageous for the Ukraine. However, Yushchenko is notlikely to risk scrapping it – the indignation of the European Unionwould be far too great in this case, and the EU would in this caseunequivocally lay the blame for what happened on the Ukraine.
But is the agreement of «Gazprom and Naftogaz» all that disadvantageousfor the Ukraine?

Its text, having appeared in the mass informationmedia, leaves manyquestions unanswered. The main thing is that the text of the agreementscontains enough clauses that, should one of the parties so desire,could provoke a new crisis in the gas mutual relations of the twocountries and Europe. Just item 4.4 alone: «If any one of the partiesdeclares that circumstances on the market for fuel-and-energy goodshave materially changed, compared with what the parties reasonablyexpected when entering into the present Contract, and the contractprice indicated in item 4.1. of the present contract does not reflectthe level of prices of the market, then the Parties shall enter intonegotiations with respect to a reconsideration of the contract pricesin accordance with the provisions of the present Contract».

Inasmuch asprices for oil, and correspondingly, the prices for gas, which areclosely tied to them, will likely be falling substantially in the nextfew years, and then, after the start of the economic upturn, may riseno less sharply, both sides may have good pretexts to startnegotiations about new prices, and in the event of their failure toshut off the tap for European consumers. In addition to this, thereremain problems of settling the relations of «Gazprom» and «NaftoGaz»with «RosUkrenergo», the intermediary from the services of which theyhave now turned away. Here too there are enough pitfalls to elicit anew conflict, all the more so given that, as experts suspect, it isprecisely through «RosUkrenergo» that many highly-placed stateofficials of Russia and Ukraine were getting their piece of the gas pie.

It is not by chance that ex-minister of foreign affairs of UkraineAnatoly Zlenko asserts, based on his ownexperience, that «agreements between Ukraine and Russia, which aresigned for decades, were not carried out… When new forces would come topower, all agreements would be violated. Therefore I can not sayprecisely that the Timoshenko-Putin gas agreement for 10 years withrespect to transit and deliveries of gas will be carried out». Notwithout justification, he considers that both the Ukraine and Russiawere losers in the gas conflict, inasmuch as the former showed itselfas an unreliable transiter, and the latter – an unreliable supplier.

And here we come to the economic component of the gas conflict. Thereis no doubt that besides political ones, Russia also had perfectlyobvious economic objectives. The Ukraine had them as well, but for thelatter, economics stood in first place. What was being demanded was toobtain Russian gas at an acceptable price, which would not entail thecollapse of Ukrainian industry, already keeled over in the conditionsof the economic crisis, and if possible to raise the rate for transit.

Now, politically, both Timoshenko and Yushchenko wanted to play themain role in the settlement of the crisis. But getting real money forthe gas was important for the Russian side as well. In the conditionsof the world financial-and-economic crisis that had begun and theprogressing fall in prices for oil, «Gazprom» was trying to confirm aprice that was maximally advantageous for itself for the year 2009,preferably at the level of the 1st quarter, and if possible to fix theexisting transit rate on Ukrainian territory at the existing level.Partially, it achieved these objectives. In the opinion of a series ofexperts, the agreements entered into are more advantageous for Russiathan for the Ukraine, at the very least because they allow «Gazprom»into the internal gas market of the Ukraine. However, this serioustactical victory is overshadowed many times over by Russia’s muchlarger strategic loss.

This loss consists of the following. One of Russia’s objectives hadbeen to prove to the European Union that the Ukraine is an unreliabletransiter, and thereby to rouse the officials and businessmen of theEuropean Union to invest in the construction of the Nord Stream gaspipeline to bypass the Ukraine. But what happened was a completelypredictable – albeit from all appearances nevertheless unexpected forMoscow – result. In the European Union, the first thing they becameconvinced of was the unreliability of «Gazprom» and Russia as a sourceof the inflow of gas. And although the European Commission and theleaders of the states of the EU tried the entire time of the gasconflict to maintain a position of «equidistance» from the parties tothe conflict, criticising both Russia and the Ukraine, the consumers ofgas in a freezing Europe blamed Russia first and foremost for what hadhappened.

It is not by chance, after all, that indignant demonstratorsin Orthodox Serbia and Bulgaria burned Russian, and not Ukrainian,flags on the streets. To this must be added also that according toagreements previously entered into with European consumers for theuninterrupted delivery of gas, it is «Gazprom», i.e. Russia, that isanswerable to them, and not the Ukraine, if anything happens, it isagainst «Gazprom» that lawsuits on the part of Europeans are going tobe directed.

In all likelihood, Europe is now going to seriously undertake aresolution of the problem of diversification of its energy supply.There are several ways to go here. One could build new gas pipelines,including Nord Stream and NABUCCO. However, thee gas pipelines will goon stream no earlier than the year 2015 and require multi-billion dollarappropriations.

Furthermore, the construction of Nord Stream to a largeextent is becoming senseless, as it merely expands Europe’s dependenceon an unreliable supplier of gas – Russia. Yet another alternative -investment in the construction of vessels and other infrastructure for liquefied gas (first and foremost from Algeria) – is also problematic. Thisproject too requires many years (if not decades) for its realizationand is exceedingly costly. Just as costly and long-term is the searchfor commercially significant sources of energy alternative to thetraditional ones.

Therefore, what remain are just the following ways ofincreasing the energy security of Europe that can be implemented in thenext five years without stratospheric expenditures: an even widerproliferation of energy-saving technologies, the re-commissioning ofatomic power stations shut down under the pressure ofenvironmentalists, the joining together of European gas pipelines intoa single grid, the conversion of a part of the power stations andindustrial enterprises from natural gas to fuel oil. If the EuropeanUnion will concern itself seriously with the realization of thiscomplex of measures, there will soon be no place to export Russian gas.

I assert that the best way out of the Russian-Ukrainian gas war, whichhas ended with a for now shaky truce, could become an agreement enteredinto between the European Union, Russia, and the principal transitcountries for Russian gas, the Ukraine and Byelorussia. Such anagreement could guarantee both the obtaining by Byelorussia and theUkraine of gas at prices acceptable to them, and clear and transparentrates of transit for Russian gas into Europe and a mechanism forchanging them.

In conclusion, I would like to note that the gas conflict from theRussian side also had an important PR component. The live broadcastingby the telechannels of Moscow’s principal steps in theRussian-Ukrainian gas dispute was called upon to distract the attentionof the Russian public from the financial-and-economic crisis, as wellas to plant a thought about how the Ukraine is much to blame forRussia’s misfortunes because it «steals gas». But, taking into accountthe limitedness in time of the «gas topic», it is unlikely that thecorresponding PR move could have a long-term effect. Probably it wouldbe better going forward not to make negotiations on the gas problem anobject of PR, but rather to attain mutually acceptable and workablecompromises far from the television cameras.

Boris Sokolov is a university professor and columnist living in Russia, who lost both of these jobs following an article he published about the war in Georgia.  This is an exclusive submission to  Если Вы хотите прочитать оригинал данной статьи на русском языке, нажмите сюда.