I will confess to feeling a certain level of exhaustion with the Ukraine-Russia natural gas dispute. Therefore I’ll let the Economist do some heavy lifting for me, which describes the fight in three layers – the pricing, the politics, and the quieter fight between the businessmen (best captured by Jérôme Guillet and John Evans in the FT). To talk about the dispute without considering all three of these issues at once is to misunderstand what has happened (this is precisely what too many talking heads are doing on TV, thus driving me crazy).
Had this been a purely commercial dispute, a compromise would surely have been struck. But as ever with Russia and its neighbours, there are second-layer political undercurrents. Little love has been lost between Ukraine and Russia ever since the “orange revolution” brought anti-Russians to power in Kiev four years ago. Recently, Russia has accused the Ukrainians of supplying arms to Georgia during the war in August and said it would take this into account when forming its policy. “A more serious crime than arms deliveries in a conflict zone cannot be imagined,” Mr Putin told Yulia Tymoshenko, his Ukrainian counterpart, when the two discussed gas prices in October.
The third layer is the political rivalry within Ukraine between MsTymoshenko and the president, Viktor Yushchenko. What complicatesmatters is a controversial intermediary, RosUkrEnergo, which ispart-owned by some Ukrainian businessmen and Gazprom. It was set up onMr Yushchenko’s watch and Ms Tymoshenko wants to scrap it. This mayexplain why, when Ms Tymoshenko was ready to fly to Moscow to concludenegotiations on December 31st, Mr Yushchenko stepped in to undermineher (in a different version, her trip was called off by Moscow).
Europe has long stood aside from Russia’s fraught gas relationship withUkraine. It now has no choice but to jump in. The main lesson from thiscrisis, says Gazprom, is that alternative pipelines bypassing Ukraineare needed. Ukraine retorts that further integration with the EU is theanswer. But until Europe diversifies its sources of energy, it willremain hostage to Russia’s rows with its neighbours.