A Russian Speaks out against Russian Aggression in Ukraine

Frost and War Bosses

Nikita Varenov

Grani.ru

1/7/2009

Translated from the Russian by The Other Russia

There is so much politics in the contractual relationships of Russia, Ukraine and the European Union on the issue of [natural] gas deliveries, that the emerging crisis can’t be understood as an argument between two business entities. Nonetheless, its resolution lies precisely there– there are national laws and international agreements, there are signed contracts. And one needs to read them to understand who is formally correct in the current situation. The different sides will do just that during negotiations this Thursday.

But a newly formalized gas transport reality isn’t the only result of the current conflict. The European Union, where factories have stopped working, schools have closed, and the heating supply has been interrupted as result of gas shortages, will not forgive one of the sides, it stands to reason. The likelihood that this will be Russia is fairly great.

The point is that as a consumer, the European Union is indifferent to the underlying reasons for the conflict. The restoration of uninterrupted gas deliveries is important for the EU, especially as a cold winter sets in. Ukraine can likely be charged for dishonest transit, especially if it is proven that gas theft actually took place. But Russia’s fault before the European Union is much greater: a producer and first order supplier cut shipments after failing to settle differences with a intermediary.

One cannot say that Gazprom is completely unprepared for the situation that arose. Reserves have been pumped into underground storage tanks on the territory of Europe. Additional volume is moving by alternate routes – through Belarus and the floor of the Black Sea. But in the end, this does not take the blame off Russia: shipments to ten friendly European countries have stopped completely; [shipments] to the rest have been cut by more than half.

Everything has been done tactically right at Gazprom, but the corporate group in principle lacks a strategy to diversify its distribution channels. A year ago, Russian humorists were already joking about a Ukrainian New Year’s [holiday] with gas-free champagne. But in 2008, nothing was done to ensure that in 2009, Europeans would have gas bubbles in their champagne.

Why it wasn’t done is a separate question. Relations with the Baltic countries have been built on discussing the results of the Second World War for decades. On the Belarussian front, Russia was more concerned in 2008 with twisting Lukashenko’s arms, so that he would finally recognize the independence of two semi-criminal enclaves in the Caucasus. In the last case, a reduced price for gas, by the way, was one of the levers of pressure (and this lever didn’t work largely because of Ukraine’s intractability –Moscow didn’t go for a conflict with two intermediaries at the same time.) In the Caucasus, finally, Russia managed to destabilize the situation to such an extent in the past year, that projects for a direct gas line from Turkmenistan are no longer being discussed (whether they bypassed Russia or not is already unimportant).

Of course, most problems in international relations go outside the realm of Gazprom’s authority as a commercial entity, but the point is that the gas group is not simply a commercial entity in the Russian economy and in Russian foreign policy. Russia (and Gazprom as a de facto government ministry) doesn’t tire of swinging its baton, trying to force its will on its neighbors without considering the costs. The start of Dmitri Medvedev’s presidency has been marked by this path, and it no longer matters how liberal he is on the inside.

The conflict in Georgia raised a boisterous reaction from Europe, but nonetheless had only peripheral meaning for it. Neither the severe Angela Merkel, nor the pragmatic leaders of Eastern Europe, nor the accommodating Nicolas Sarkozy, and especially not the ultra-loyal Silvio Berlusconi, initiated any real steps to pressure Russia then. Partly because of that infamous energy-dependence, however cynical that may sound. Today, when it’ll be the European voters freezing, and not the Georgian ones, their leaders will clearly be firmer.

The energy dependence, of course, won’t go anywhere. For now. And the European Union’s strategy to get rid of this dependence will definitely not go anywhere either. One of the possible steps to take when failures happen in the supply chain is to get rid of the middleman. How could the EU get rid of the Ukraine in its present guise? Accepting it into its group, for instance. Would the Russian authorities have the gall to eternally scare an EU member country with frost?

Not to mention that Russia needs a great deal from Europe. Europe isn’t just a market for Russian gas, but for countless other types of raw commodities and goods. And in many cases, unlike gas, they can be substituted, especially if there were a united political will for it.

Finally, that same gas is only valuable when it is being bought. Side by side with oil it is one of the major sources that replenish the Russian [currency] reserves, whose amount in times of crisis is especially important for the authorities. That being said, the prices for gas, unlike those for oil, don’t bounce by 5 percent a day. Taking into account the losses from January’s forced down time, even an insignificant reduction in the volume of future purchases is capable of reflecting critically on Gazprom’s incomes.

The parties will already start discussing new volumes, conditions and prices tomorrow. The EU has joined in the negotiations between Russia and Ukraine in a directive capacity. And Russia’s position at these negotiations doesn’t look quite so strong as it seems at first glance.

8 responses to “A Russian Speaks out against Russian Aggression in Ukraine

  1. The need for alternative sources of gas has been discussed in the EU for more than twenty years now, with little success. Russia will always remain the single most important supplier of energy to the EU in the politically relevant future (20 years from now is irrelevant to all parties concerned).

    The EU will do what it needs to do to get energy supplied without interruption, and if that means throwing Ukraine to the bear, that’s what it will do.

    Nobody in Germany and France gives a damn about the fate of Ukraine, and whether or not such thinking will be detrimental to Europe 20 or 30 years from now is also of no importance to anybody there.

    Russia will get its North Stream, and its South Stream, Nabucco is going nowhere, and Ukraine has to accept the reality that in international affairs, there is no morality beyond that of immediate pay-off.

  2. The reality is, that all of the above is Kremlin’s wishful thinking. Although the morality of many international dealings is questionable, the Kremlin’s unsurpassable stupidity is not. It is the latter that has determined the fate of the USSR, and it is going to determine the fate of USSR-2 (a.k.a. Russian Fedaration). Amen.

  3. Actually Lala, Nord stream & South stream are probably not going anywhere either.

    Sweden, Finland, & Estonia are all HIGHLY opposed to the Nord stream on environmental & political grounds.

    Then there are the matters of the horrific costs of construction & maintenance of submersed pipelines, and the (very real if Russia is involved) chance of a major environmental catastrophe.

    Nabucco is much more likely to occur as part of any diversification of energy sources for europe.

  4. Germany’s position in this game is singular. Its dependence on direct or indirect ( central asia) gas ( 60%) and oil transfers (40%) via Russian pipelines is extraordinary and matchless under western countries. How could it come to such a crazy dependency from only one seller? Former chancellor GERHARD SCHRÖDER did all what he could do in his 8 year long term of service (-2005) to bring his own country into this dangerous position. Schröder was Putin’s most important alliance partner to initiate North Stream plans. It would need 10-15 years for Germany to reduce this dependency. Since 2006 Schröder is acting as Putin’s and Gazprom’s commercial agent and defends all possible Russian activities as in Georgia and still praises Putin as “lupenreiner Demokrat” ( crystal clear democrat) earning some 100.000 Euros annually for his past ( during his own term in Germany) and current work for another country. How do people usually call such a behaviour ?

  5. There is one more realistic scenario (worst case from Russian perspective). EU incorporates Ukraine into its grid and says to Russia: deliver gas to Ukrainian borders and don’t worry about the rest. In such case EU (including Ukraine) pays market prices for Russian gas, and Russia pays market prices for transportation. This turns Russian position into Turkmenistan of 90-s. The supplier (Russia or Turkmenia) has no influence on the customers, has no “gas pistol” and becomes just a third-world commodity supplier – exactly what Russia is entitled to.

  6. Felix, an excellent idea!

  7. “Sweden, Finland, & Estonia are all HIGHLY opposed to the Nord stream on environmental & political grounds.”

    quite. They’re all saying “not in MY territorial waters, you’re not”. Now, there is a strip of international waters between Estonia and Finland but there has been talk about extending both countries’ territorial waters to meet each other in the middle as a last resort to stop the construction.

    Best time ever to establish new wind turbine fields.

  8. During the first four months we will pay $360 for gas. And that is exactly twice as high, than paid until now. And Timoshenko’s «about» means a kind of an average annual price. Such a convinient gap : nobody knows its size, so no one will notice, someone will grab a piece of pie from there.

    Interestingly, that Timoshenko enmeshed a little in Putin patterns. «A price which will be firm throughout the year, will make $228,8 for thousand cubic meters», – she declared in the morning. And later she told about a «quater year» pattern.
    <a href=”http://ua-ru-news.blogspot.com/2009/01/new-price-on-russian-gas.html”

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