Russia: Return of the Energy Threat?

Russia

In the midst of the tense crisis between Ukraine and Russia over the control of the Crimean peninsula, Russia flexed its diplomatic muscles and returned to the use of a common instrument of its foreign policy: the energy threat.

In addition to the tensions created by Moscow’s de facto military invasion of Crimea, the problematic energy relations between Ukraine and Russia represent another serious aspect that brings the crisis to a higher level of complexity.

On Tuesday Interfax news agency reported that Russia’s state-controlled energy giant Gazprom announced its intention to scrap a gas deal with Ukraine that allowed Kiev to get a 30 percent discount on market prices.

President Putin had conceded the rebate to Kiev last December, together with a $ 15 billion aid, after president Yanukovych ditched a comprehensive trade agreement with the EU.

On Tuesday, Gazprom’s CEO Alexei Miller said the decision came after Ukraine failed to pay its February gas bills. However, according to a number of analysts, it is quite likely that the decision to cancel the discount is Russia’s way to both punish Kiev’s opposition leaders now in power and a  threat to the European Union, currently discussing the possibility to introduce sanctions against Moscow.

As a matter of fact, Tuesday’s announcement comes a day after Gazprom deputy chief Alexander Medvedev reminded Europe that, despite the sanctions, the continent will need to keep on importing a steady amount of Russian natural gas in the future, due to the continuing depletion of its main indigenous reserves located in Britain and Norway.

It was a remark that signaled the return of Moscow’s energy threat in times of political confrontation over Ukraine. For Europe the message is a sobering reminder of Russia’s geopolitical leverage, as most of the gas shipped to the EU from Moscow flows through Ukrainian pipelines.

The use of energy as a political tool is a strategy Russia has applied repeatedly during the last decade in order to keep Ukraine on its side and far from Brussels.

During the Ukrainian electoral campaign of 2004, for instance, Moscow agreed to cut down gas prices for Ukraine in order to tip the balance of the election in favor of his preferred candidate, Viktor Yanukovych.

After the victory of pro-European Viktor Yuschenko, that came to be known as “Orange Revolution,” Gazprom manifested its frustration by immediately reversing its decision and demanding a six-fold increase in the price of gas.

The sudden price hike led to the crisis of Yuschenko’s government and caused his defeat in late 2006. With the arrival of Yanukvych in power in October that year, Russia curiously conceded a favorable gas price to Ukraine and began to push the new administration to agree to Moscow´s takeover of Ukrainian pipelines used to export gas to the EU.

A similar squabble over gas prices occurred again in 2009, when Russia diminished the flow of gas to Ukraine, causing serious disruptions in several European countries and further sparking the EU’s drive to usher in a diversification of energy suppliers, which is long overdue.

While Russia has so far simply pointed its gas weapon to Ukraine and Europe without pulling the trigger, Gazprom’s assertive stance vis-à-vis Ukraine increased the threat of crude and gas disruptions and has already produced a sensible spike in energy prices on international markets and might bring the crisis in Ukraine to the point of no return.

By Stefano Salustri

Sources:
DW
Reuters
Bloomberg

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