You could say Russia is “Putin on the pressure” by cutting gas to the Ukraine in a move that could have a slew of big implications — political and economic.
For instance, the New York Times reports:
Russia cut off the natural gas intended for Ukraine on Sunday as talks over pricing and transit terms unraveled into a bald political conflict that carried consequences for Ukraine’s recovering economy and possibly for gas supplies to Western Europe.
The dispute comes a year after the Orange Revolution brought a pro-Western government to power in Ukraine. It ends a decade of post-Soviet subsidies in the form of cheap energy that allowed Russia to retain some influence over the former Soviet republics.
Choking off the westbound pipes is a striking gamble by Russia, one likely to send political and economic ripples westward in the months ahead. Russia is positioning itself to become an energy-supplying nation capable of easing dependency on Middle Eastern oil in Western Europe and even in the United States.
Gazprom, the Russian energy giant, 51 percent of which is owned by the state, provides about a quarter of Western Europe’s natural gas. Under a system begun in the Soviet era, 80 percent of Russia’s exports to Europe have passed through Ukraine. Gazprom said it had reduced the flow to equal the volumes it agreed to provide to Western countries, minus what the company provides for the Ukrainian domestic market.
On the same day it throttled back its gas to Ukraine, Russia assumed the chairmanship of the Group of 8, the club for the world’s large developed economies, promising to push the theme of “energy security.”
Yes, this move is sure to convince European nations that Russia is going to help give them “energy security” as their gas prices increase. MORE:
Sunday’s early-winter cut in gas supplies to Ukraine came as an unsettling reminder that promises of energy exports are not Russia’s only method of using oil and gas to further its foreign policy goals – it can also turn off the valve of energy exports….
The election of Viktor A. Yushchenko as Ukraine’s president last winter pulled the former Soviet country from Russia’s sphere of influence. A gas shortage this winter could discredit him and weaken his party, with parliamentary elections coming up in March.
Tellingly, President Vladimir V. Putin of Russia was personally involved in the negotiations. It was he, rather than company officials, who made the final offer of a grace period on Saturday.
According to the Daily Telegraph, shivers are being felt through Europe — and not just because of the cold:
Critics of the Kremlin say the rise was punishment for the Orange Revolution in 2004 which brought in a westward-leaning government that promised to remove Ukraine from the Kremlin’s sphere of influence.
The American State Department said that “such an abrupt stop creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure”.
The European Union has called an emergency meeting of energy ministers on Wednesday.
Britain is less vulnerable than mainland Europe because it does not receive direct supplies from the former Soviet bloc…
But as other countries seek to shore up their reserves, less gas is likely to be pumped through the pipeline that links the Continent with Britain. That could mean higher prices and, if there is no quick resolution, possible breaks in supplies.
The European Commission says that most countries have between a week and two months’ emergency reserves.
…President Vladimir Putin adopted almost warlike terms when he spoke on television as the hours ticked by before the ultimatum expired.
“If no clear response [from Kiev] follows, we will conclude that our proposal has been rejected,” he said.
The bottom line: Putin knows how to use his power and isn’t afraid to use it, regardless of what the world thinks. And that’s not lost on Europe — or Washington, the BBC reports:
Russia’s decision to cut gas imports to Ukraine is causing dismay across Europe, where supplies in a number of countries have been disrupted.
The US has also expressed concern, saying the move raised “serious questions about the use of energy to exert political pressure”.
Exports to the EU and Ukraine are carried through the same pipes. Russia says Kiev is stealing the EU’s gas.
…Hungary’s economy ministry is advising large consumers to switch to alternative energy sources like oil wherever possible.
Germany’s largest gas supplier warned that the disruption could cause problems if the dispute dragged on.
Poland and Austria have also reported diminished supplies.
EU governments are convening a meeting of their gas industry experts in Brussels on 4 January to discuss the crisis.
Times Online weighs in:
The Russian move dramatically raised the stakes in a dispute that has pushed relations with Ukraine to a new low and cast doubts on the Russian pledge not to use the country’s vast energy reserves as a political tool. It will also fuel Western concerns about Russia leading the G8 for the first time since joining in 1997. President Putin has said that he wants to use the G8 presidency to focus on energy security.
But will the gas prices actually impact European supplies….or is this mostly sending a warning shot to Moscow to ensure that there isn’t a situation in the future where Europe is impacted? Note Bloomberg‘s report:
Natural gas suppliers from Austria to England said Russia’s decision to halt supplies to Ukraine in a dispute over prices will not disrupt exports to Western Europe.
Officials from E.ON AG of Germany, Gaz de France, OMV AV of Austria and Britain’s Centrica Plc yesterday said they don’t expect disruptions from the decision by Russia’s OAO Gazprom to cut gas shipments to Ukraine. Western Europe relies on Russia’s state-run OAO Gazprom for about one-quarter of its gas supplies, much of which flows through pipelines that cross Ukraine.
Decision-makers in European countries are likely asking themselves: what OTHER circumstances could arise where Russia will use its oil to coerce decisions?