Another Blunder from Vladimir Putin

An editorial in the Globe & Mail:

Neither party is innocent in the gas dispute between Russia and Ukraine that is currently gripping Europe, but the former deserves most of the blame for a debacle that may leave millions without heat during a brutal cold snap.

Yesterday, utilities in half a dozen European countries reported complete halts to deliveries of Russian gas due to Moscow’s week-old cut-off of supplies to Ukraine over a pricing disagreement. Almost all of the gas imported from Russia by members of the European Union travels through Ukraine, which buys a portion of the flow.

In its dealings with the Ukrainian government since the 2005 Orange Revolution, Russia’s state-owned natural-gas monopoly, OAO Gazprom, has consistently behaved in bad faith and richly earned its reputation as a blunt tool of Kremlin foreign policy. The current situation is no different.

It became unavoidable when Gazprom suddenly demanded that Ukraine, which has agreed to incrementally bring its cheap energy rates into line with the rest of Europe, more than double its payments for 2009. The two sides had failed to agree on a smaller rise. Like Russia, Ukraine has been slammed by the global financial crisis, and could not possibly meet Gazprom’s terms.

The dispute grew worse on Monday, when the CEO of Gazprom, Alexei Miller, went on television to ask Prime Minister Vladimir Putin’s permission to further slash supplies by the amount the company says Ukraine had stolen from gas destined for other countries. Ukraine has almost certainly taken some gas it did not pay for, although Gazprom’s specific claims are impossible to verify.

Mr. Putin’s response? “Yes, cut it today.”

The result is a crisis that is at once artificial and extremely difficult to resolve. Kiev’s and Moscow’s preferred solutions remain miles apart.

Russia’s behaviour is indefensible. While the Kremlin’s disdain for Ukraine’s Western-oriented government is obvious, no amount of intra-Slavic score-settling can compensate for the damage being done to Gazprom’s international reputation. Even Germany, which Moscow has cultivated as a favourite customer, may be unable to meet demand for gas this week. EU meetings and communiqués have meanwhile assumed an air of what passes for alarm in that phlegmatic organization.

Whatever its motivations, the Russian government has demonstrated that it can simply no longer be trusted as an energy supplier for Europe. In addition to forcing Moscow and Kiev back to the negotiating table immediately, the EU should launch a crash energy diversification program.

Yet the people with the most to lose from the Kremlin’s irresponsibility are not in the EU, but in Russia itself. Oil and gas exporting is one of the few productive activities in Russia’s chaotic economy, and the determination of the country’s leaders to use it as a political weapon does not speak highly for their competence.

Russians deserve better from their government, and should demand it.

19 responses to “Another Blunder from Vladimir Putin

  1. This whole “dispute” is one big lie. The real reason Gazprom has stopped supplying gas is much simpler than it is trying to make us believe: the reason is, Gazprom DOES NOT HAVE ENOUGH GAS to fulfill all of its existing contractual obligations. All the rest is a pathetic comedy aimed to disguise Gazprom’s default.

  2. Sichovyk, I think you are right.
    There have been rumblings for some time that all was not well with Gazprom and its “creative accounting”

    What better way to ratchet up the price AND cover up a shortfall than to engineer a crisis in the highest use period. After all its not like the Russian government has a long history of giving a damn about human welfare or the like.

  3. Boycott Lukoil!!!

  4. Russia gets a Bronze Medal for 3rd Highest Suicide rate.

    This is the legacy Putin is building.

    Belarus is in 2nd.

    Lithuania is number 1. That may be an anomaly because the population is 1/44th that of Russia. 3.3 million people. Second, Lithuania’s neighbors are Belarus and Russia. Ow!
    3rd, we don’t know the break down percentage of Lithuanians to Ethnic Russians committing suicide. I suspect the Ethnic Russians are higher percentage.

    The point is not to cheer suicide rates. This is an awful stat. The point is to show that Putin has not done a damn thing to improve the lives of his people.

    The best thing he could do would be to get himself and his government of his citizens’ way. I know the concept of freedom is a tough one. Getting big government out of the way is a real challenge. No one wants to to give up control and power. (It is interesting that the largest nanny states have the highest rates of Suicide, Sweden, Norway, Finland. Even the happiest nation in the world judged by the leftist, Denmark, all have higher suicide rates than the US.)

    If Putin wants Russia to be a superpower, a real superpower (economic and militarily, you have to have a free society built on a democratic foundation. You have to have a functioning justice system that is deem equitable and just by its citizens. These will create a country that will be a good neighbor to your fellow nations. That is never going to happen as long as P and M are in power.

  5. Sichovyk, do you have any evidence to support this claim? “Gazprom DOES NOT HAVE ENOUGH GAS to fulfill all of its existing contractual obligations.”


    We’ve documented Gazprom’s lack of investment in development of new fields many times, particulary by referencing Boris Nemtsov’s brilliant white paper about the company which is linked to in our header. Did you read it? Or anything else we’ve written about the topic?

    When challenging a fellow commenter, you really ought to post your own link that disputes the accuracy of his statement, particularly when the statement is perfectly consistent with a long line of publishing on this blog. If not, you risk having your comment deleted as gibberish.

  6. This whole “dispute” is one big lie. The real reason Gazprom has stopped supplying gas is much simpler than it is trying to make us believe: the reason is, Gazprom DOES NOT HAVE ENOUGH GAS to fulfill all of its existing contractual obligations. All the rest is a pathetic comedy aimed to disguise Gazprom’s default.

    If that’s true, then Russia needs to raise the price on all its customers. Gas is a commodity like oil and it is beholden to the fluctuations of the market. How come Belarus and Moldova get a gas special.

  7. Kolchak, you are right, that would be another typically Russian modus operandi: if you cannot deliver on a signed contract, raise your prices and extend your deadlines unilaterally. Looks like this time they are sticking with the “refuse to deliver and pretend nothing happened” solution, though.

  8. Other republics get a discount because they follow Russia’s line in foreign policy. I like to call it the “satrapy rate.” In essence, they are forfeiting the right to independent action as a sort of payment in kind.

    Also, there’s been some talk of North Stream and South Stream over the boards here. While Russia’s North Stream travails actually engenders some sympathy (it would not be the first seaworthy vessel to founder on the shores of the Eurocracy), South Stream was actually designed in order to render the competing Nabucco pipeline impotent. As Nabucco would give European customers access to Central Asian gas over a route that did not enter Russian territory, needless to say, Putin would do anything to kill it before it got started.

  9. Here’s something interesting: Putin says that Gazprom has lost $800 million due to the gas war with Ukaine. Note the comments under the article.

    And Putin has told German television that he is ready to take part in the privatization of Ukraine’s gas pipeline system.

  10. One thing that has always surprised me is how badly Putin screws up everything that has to do with Ukraine. Here’s a situation where in a very basic sense he has the right side of the argument (why sell your gas for less when you can sell it for more) and instead he screws it up completely, appearing the bully for the most part, driving Tymoshenko back into Yushchenko’s camp (the one smart thing in Ukraine he did vis-a-vis Russia’s PR in the country was to cut a deal whereby she’d stay quiet about Georgia in return for his keeping the gas flowing; the current situation basically shoots THAT down), and driving European customers crazy to the point that they may actually bite the bullet and start looking into liquified natural gas.

  11. Scott, I’d certainly have to agree with you on that, although I doubt very much the part about driving Tymoshenko back in Yushchenko’s camp.

    So far my favorite comment on the Ukrainian Pravda article about Gazprom losing $800 MILLION due to the gas dispute is this:

    Пути, пути. За чем ты это устоил? Понесло с принуждением Европы к мессианской роли раши? Теперь разхлёбуй!!

    Someone can translate it much, much better than I, and I won’t try, but the gist is

    “Putin, Putin, what have you done. You got carried away with the messianic role of Russia in Europe? Now deal with it.”

  12. I wonder where in the contracts Gasprom has signed it is written that Gasproim has the right to cutt of the gas if there is a dispute with a third party.

    Several days without gas on the Balkan and in Central Europe in the middle of winter. Local gas distribution companies loose money because they can’t deliver gas to their customers because they can’t deliver at the moment when demand is at it’s peak. Small businesses and even big factories which depend on gas as a sourde of energy loose money because they can’t operate normally. And who is going to pay all that economic damages? I hope Gasprom will be presented the bill for the damages done by not living up to their contracts. If Russia feels it has the right to refuse delivery to one of it’s customers because that customer isn’t following it’s contractual obligations, Russia should be ready to pay for not following their own contractual obligations i.e. to deliver gas.

    I hope some countries will have the guts to sue Gasprom, and to confiscate money and infrastructure owned by Gasprom if they don’t pay.

    And if they cut off the gas next time in the middle of winter, the solution is easy. Russia gets half of it’s food from or via the EU. If deliveries are stopped, it’s at that time of the year not so easy to buy food elsewhere. I wonder how Putin and Medvedev would like some food riots.

  13. Commentato makes a good point.
    It is much easier to live without gas than without food.
    Maybe we should hike the price too?

  14. That is an EXCELLENT question. But roosha keeps the contracts a secret.

    And roosha doesn’t honor contracts. Putin, as a government official, run Gazprom, because he thinks he is a “beeznissmin.”

    Remember the treaty that roosha signed with Georgia, that has turned out not to be a treaty at all, because roosha “interpreted” it differently?

    One does business with roosha at one’s peril.

  15. Yes Elmer, there were several treaties the Rooshans signed with Georgia, most of them “respaecting” Georgian sovreignty, which the rooshan scumbags immediately set out to undermine by suppoting terrorists such as Kokoity, Ardzinba, and later Bagapsh.
    And of course the infamous ceasefire agreement.
    Funny how there are still Russian troops in Perevi, Akhalgori, Khodori and several other villages that were outside South Ossetia & Abkhazia, or areas under Georgian government control prior to the conflict, and from which the Russians had agreed to withdraw according to signed international agreements.

    Unfortunately any agreement signed by Russia is worth about as much as a used piece of toilet paper.

  16. I am still looking to an answer to Commentator’s EXCELLENT question about what right roosha has to cut off gas to Germany, if it has a dispute with Ukraine.

    In the meantime, in line with the topic, here’s an article from the Eurasia Daily Monitor about how badly Putin mishandled this gas dispute/war – and how Medvedev is irrelevant.

  17. There is actually no need for the EU to do anything to create food shortages in Russia: the credit crunch has already created huge problems for the majority of Russia’s food importers, whose operations are heavily dependent on credit availability.

    In the meantime, some Russians, like the well-known here Mr. Milov, start getting it already:

    Еще одна возможная причина конфликта связана с неудовлетворительным состоянием российского газового баланса. Газа просто не хватает, и, перекрывая транзит, его можно сэкономить.

    “Another possible reason for the conflict has to do with the unsatisfactory state of the Russian gas balance. There is simply not enogh gas, and one can save some by shutting down the transit”

    Of course, the majority of KGB-TV watchers will never learn about this.

  18. The rooskie sovoks just keep at it.

    They failed to coodinate with Ukraine’s Naftogaz before announcing that they would be sending a “test” shipment – at much lower volumes and pressure.

    Why would they need to send a “test” shipment?

    On top of that, they sent the gas down the wrong route, which would require Ukraine to shut down supplies to domestic consumer.

    sovoks just don’t care – they don’t know how to be human beings. It’s all about gamesmanship.

    Does Gazprom really have gas?

  19. I find it interesting how these gas disputes where Russia “has had enough” with Ukraine always seem to happen on or around the New Year, coincidentally happening when people are celebrating and when it happens to be the coldest part of the year.
    I also find it interesting that Russia has never threatened to turn the gas off in July or in the middle of summer. I wonder why Putin and his chest-beating-I’m-an-alpha-male buddies don’t get upset about this issue until only when the gas is most needed in the freezing winters of Europe?
    Surely he’s not just being a jerk and trying to do more of his trademark practice of alienating the whole world? Or is he?
    It’s pretty obvious its just another transparent bit of childish thuggery from the government of Russia as we have come to expect.

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