December 21, 2005
Ukraine Justified In Russian Gas Concerns
By: Rowan Wolf
The headline reads "Russia to Cut Off Gas Supplies to Ukraine." The Ukraine and Poland were concerned that the pipeline agreement between Germany and Russia (Gazprom) would result in a dramatic price increase for them. They were right. Russia has tripled the cost of gas to the Ukraine, and the underlying threat is to cut off the supply entirely. The increase would hike the price of gas in the Ukraine from $50 per 1,000 cubic meters to $150.
What is shaping up is clearly a case of blackmail for both Poland and the Ukraine. According to Radio Polonia: "Political commentator Piotr Mroczyk is of the opinion that Russia has developed a new tactical weapon - gas and crude oil instead of nuclear potential - in its return to imperial dreams and Poland must be aware of that."
However, Poland and Ukraine are not the only ones nervous over Russia's threat to shut off the (gas and oil) tap if it finds it in its political interests to do so. There is an interesting analysis in Novosti (see in full below) that examines each of the former Eastern Block nations. The threat is real, and likely to be effective.
The larger concern is that Russia is back to its imperial dreams run on the back of its oil and gas reserves. Given that those reserves are not limitless, that empire may be on a short track. However, the U.S. imperial manuevers, also based on controlling petroleum resources, is also on a short track. That does not mitigate the amount of chaos and destruction that can (and likely will) occur in these versions of resource wars.
It should not be lost on anyone that Russia and the United States are not necessarily competitors in this endeavor as much as co-investors. The privatization of Russia's oil and gas was orchestrated out of the United States, and the Western corporate hand in all of the same for both nations. While Russia may enforce the decisions about who does and does not get oil and gas, it is the big money that will reap the profits. Yes, it is blackmail, but it is blackmail with the backing of a not so hidden partner.
Novosti, 12/19/2005 The CIS and Baltic press on Russia
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The press is increasingly questioning the expediency of Russia assuming G8 presidency. Some publications predict a failure for the country which is striving to join economically developed nations. "Analysts say that Chechnya and Uzbekistan may become a stumbling block to Russia's G8 Presidency next year. The European Union and the U.S. have huge doubts about Russia's right to hold the presidency next year despite all its assurances." (Postimees, December 12.)
"Russia's entry into the club of economically advanced nations has been cancelled. President Vladimir Putin may welcome next year the leaders of the world's seven strongest nations in his native St. Petersburg, and discuss politics with them. But when London played host to the G7 meeting of finance ministers last week, Russian Finance Minister Kudrin was conspicuously absent. This means that he will have nothing to do at the summit in St. Petersburg next summer." (Parnu Postimees, December 12.)
Appointment of German former Chancellor Gerhard Schroeder as head of the supervisory board for the consortium on the construction of the North European Gas Pipeline (NEGP) has caused an uproar. "It was Schroeder who stood behind the project worth four billion euros. As the German leader he concluded the deal with the same cynicism with which he inspired anti-American hysteria in Germany to win the elections, or opened his arms for President Putin, not giving a damn about the tragedy in Chechnya or the growing autocracy of the Kremlin... It would be no exaggeration to say that Schroeder will now be getting his salary from the Kremlin. This is a new style of conduct both for the Kremlin and for the leaders of Old Europe." (Postimees, December 10.)
Statements by the Russian ambassador to Latvia on the initial plans to extend the North European Gas Pipeline (NEGP) to Latvia and assurances of German Chancellor Angela Merkel about consideration of the neighbors' interests evoke skepticism. "Angela Merkel understands perfectly the importance of the pipeline for her country: for some time Germany will become an exclusive supplier of Russian gas to Europe in a situation where the amount of gas extracted by European companies is steadily decreasing. Under the circumstances, Germany has nothing to gain from involving Poland in the project, because the laying of the pipeline may make Berlin dependent on Warsaw to some extent." (Chas, December 12).
"The assertions of the Russian side to the effect that Latvian officials had not reacted promptly to Russia's proposals on extending the pipeline to Latvia are very dubious. From the very start the purpose of the ambitious project has been to leave out transit states. For this reason references to the inertia of the Latvian authorities are more likely to be Russia's political kicks." (Neatkariga rita avize, December 10.)
The plans of the Russian LUKoil to stop supplies of "extra" oil to Europe have caused an unfavorable reaction of the Latvian press. "The statement by Vagit Alekperov, head of the oil concern, has sounded as a response to President Putin, who called the price on Russian oil "unfair" in his speech in August 2005 and demanded that Urals should cost as much as Brent... Russian analysts believe that this statement by Vagit Alekperov has nothing to do with the economy and is a strictly political move. LUKoil is acting not as a market player but as a division of the Russian Foreign Ministry, making it clear to the Kremlin that oil companies support the president's wish to even out prices on Urals and Brent." (Telegraf, December 12.)
Many articles are again devoted to the North European Gas Pipeline (NEGP). "This event is being mourned in the Baltics and Poland. It is only natural, considering that four countries have been deprived of huge financial injections which could steadily feed them for transit until the Russian gas supplies were exhausted. Besides, they could make money on the construction of the pipeline. Not surprisingly, the leaders of these countries were making desperate and even inappropriate attempts to resist the NEGP project." (Litovskaya Narodnaya Gazeta, December 12.)
The media continue to express concern about a sharp increase of the Russian gas prices. "Gazprom has come up with a New Year surprise - a much higher price on gas supplies to Lithuania. This may become a snowball causing an avalanche of growing prices, and the dream about the introduction of the euro will go up in smoke." (Veidas, December 12.)
A statement by Kaliningrad Governor Georgy Boos about the intention to build an oil refinery, which would be an alternative and competitor to the Lithuanian Mazeikiu Nafta, was perceived as another unpleasant surprise. "LUKoil Baltija head Ivan Paleichik has not ruled out the possibility that LUKoil may decide to build a refinery if it fails to get the shares of the Lithuanian oil complex. 'If the refinery is built, Mazeikiu Nafta will be of no interest,' said he... Experts said that regardless of how serious Boos is, his statement might cause a drop in the market value of Mazeikiu Nafta's shares." (Litovskaya Narodnaya Gazeta, December 13.)
The absolute majority of the media have focused on the Russian-Ukrainian gas conflict, which has reached its peak. The press believes that the deadlock took the confrontation to the presidential level. But Vladimir Putin and Viktor Yushchenko have not resolved it over the phone. (Lvivska Gazeta, December 12.)
"Yushchenko's attempt to interfere in the disputes of the corporations has not produced the desired effect. A call to Putin has had no consequences for Gazprom." (From-ua, December 12.)
The press is emphatically negative about Putin's statement that Ukraine can pay market prices for Russian gas. " 'Bolivar won't carry double,' with this statement Putin wanted to condemn Ukraine to Martian prices on Russian gas... This is a peak of a fierce gas and information attack by Russia... One more assault in the same vein and Russians, who have been sick with chauvinism for centuries, will look at Ukrainians as number one enemies. The reverse attitude will be much the same." (Delo, December 13.)
Commenting on the forthcoming rise in prices for Russian gas supplies to Ukraine, some media view the problem as a strictly political issue. They write that Gazprom's demands reflect the Kremlin's attitude to post-Orange Ukraine and to its policy directed at Euro-Atlantic integration. "It is unlikely that Gazprom prices are not motivated by politics... Belarus is paying much less for gas than Gazprom demands from Ukraine, which has spoilt its relations with Moscow." (Ukrainskaya Pravda, December 8.)
Other media are convinced that economic considerations prevail in Moscow's decision to charge more for gas. "It is important to bear in mind that gas extraction in Russia is quite expensive. Unfortunately, our northern neighbor is not Kuwait, when it comes to getting the blue fuel from the ground." (From-ua, December 9.)
The media do not question that Ukraine will stick to its ultimatum at the negotiations with Gazprom. "At a cabinet meeting the employees of Uktransgas, a subsidiary of the National Joint Stock Company (NAK) Naftogas Ukrainy, explained that Russia does not have a technological capability of reducing the transit of natural gas to Europe via Ukrainian territory. In effect, Russia is faced with a choice: either transport natural gas through a system of gas mains in Ukraine, or burn it right at deposits. The position expressed by experts at the meeting will allow Ivan Plachkov (Fuel and Energy Minister) to be very tough in defending Ukraine's interests in the forthcoming talks, and, in effect, to dictate terms to Russia." (Kommersant-Ukraina, December 13.)
The Ljubljana OSCE meeting of foreign ministers has received the most extensive coverage by the Moldovan media. Journalists write that problems of the nation are already viewed as problems of regional and European security. In the opinion of the press, in Ljubljana Russia set itself in open opposition to the U.S., EU and NATO, and was hostile to the OSCE (Organization for Security and Cooperation on Europe). "It is unclear when the die was cast, but it is certain that Russia has just decided to cross the Rubicon, which separates it from the West. In Ljubljana Russia demonstrated that it was launching a strategic campaign to alienate itself from the U.S., EU and NATO... Even formally, a regional conflict is no longer an issue. Transdnestr is becoming a declared goal in the Russian counteroffensive on the post-Soviet territory." (Flux, December 9.)
Considering the expediency of Russian-Armenian strategic partnership in the context of gas problems, journalists once again point out Moscow's scornful attitude to Armenia's needs. "Pursuing its price policy, Russia ignores our close relations." (168 Zham, December 7.)
Mass media maintain that if gas prices are raised, it will be sensible to demand compensation for Russian military deployed in Armenia. "Russia pays $7 million annually to Azerbaijan for using its radar in Gabal. Americans pay millions of dollars to other countries, including their strategic partner, Turkey, for deploying their military bases on their territory. Can Armenia demand financial reimbursement for Russia's military base in Gyumri or has it pledged all of its security?" (Azg, December 10.)
The agreement to deploy American troops in Romania has received a wide coverage. Hope is expressed that the United States will interfere with conflict settlement in Georgia. "It is another signal for Russia that this region is withdrawing from its sphere of influence... [America's military presence in Romania] has the potential to settle existing conflicts, but does not mean that the bases will be used for this purpose. Obviously, it is relevant for the Transdnestr conflict, but Abkhazia is also fairly close. So, from the military strategic point of view, this makes it easy for the United States to take part in resolving these conflicts." (Rezonansi, December 9.)
Experts point out that it is better to use the European Union as a "mediator" in Georgia's relations with Russia. "If we put aside purely material considerations, then the main expectation will be settlement of a political problem that is 200 years old, which Georgia cannot do on its own. The essence of the problem is clarifying the issue with Russia, which implies signing an agreement with the northern neighbor. This definitely requires a mediator. Clearly, Russia does not want to part with its colonies in a civilized way, like England and France did... So far the U.S. foreign-policy doctrine does not seem to include mediating between Russia and Georgia. At this stage, only the European Union can act as a mediator." (Rezonansi, December 12.)
Azerbaijan's success in competing with Russia on the European oil market and the expectations that very soon it will overcome its dependence on expensive Russian gas supplies, allow mass media to paint bright forecasts about liberation from Moscow's economic and even political pressure. " Obviously, ... Russia is ready to 'adjust gas prices' according to the buyer's political persuasion. For example, Belarus pays only one fourth of the price that is demanded from Ukraine. Of course, Europe is likely to draw its own conclusions from the 'gas war' against Ukraine and think about the price they will have to pay for Russian energy. However, Vagit Alekperov, head of Russia's largest oil company, LUKoil, has stated unequivocally that Russian Urals oil should cost 'much more than it does at present.' He warned, 'We will make sure that Europe does not get too much Russian oil.' It seems that to bring Caspian energy to the European market will not only open new economic prospects to this country, but will also allow it to get more serious guarantees of political security." (Ekho, December 12.)
When OSCE observers said the presidential election in Kazakhstan failed to meet the standards of the organization, the press accused the observers of being biased.
"The OSCE (Organization for Security and Co-operation in Europe) seems to be assessing elections in different countries not on the basis of facts but depending on how it wants to present the authorities and political regime in the member state." (Nomad, December 7.)
"The OSCE is playing a double game. Who has sent OSCE observers to our elections? Russia's contribution to the OSCE has been reduced from 9% to 6%, while the American contribution has been raised form 9% to 12%. Can we trust their assessment?" (Aaikyn-nedelya, December 9.)
The press reports that the Russian media market is fully controlled by the state. "In the five years of Vladimir Putin's presidency, the Kremlin has established strict control over the media. Made subordinate to the state, they are clearly instructed by the authorities what information policy to pursue. It seems only two types of printed media will be left on the Russian market soon: pro-Kremlin socio-political state publications and tabloids." (Liter.kz, December 7.)
The local press discusses the future of the Russian military base at Kant and the American one in Gansi. Most media emphasize positive aspects of Russian military presence but are doubtful about the benefits of the American military base.
"The air force base in the Kant airport has become a reliable barrier protecting Central Asia from international threats. Unlike Russians, the U.S. aircraft deployed at Gansi damage the environment by dumping tons of kerosene over the Chuya Valley." (Kyrgyz Press, December 7.)
"Thanks to the lease of the Kant air force base by Russia, the state budget has accrued nearly $10 million in the last three years. The Gansi base has earned $2 million less in the last four years. The cultural influence of the Russian base in Kyrgyzstan is favorable, as Russians and Kyrgyz can speak the same language." (Gazeta.KG, December 7.)
The media warn about a possible confrontation between Moscow and Washington and recommend that Russia should work harder to formalize its geopolitical presence in Central Asia. "When Vladimir Putin came to power in Russia, the country changed its passive stand and has been working to revive its imperial status in the 21st century. The West has sensed for the first time that Moscow is losing patience in Central Asia, the Russian bear has woken up and is growling. But the Washington administration is not sitting on its hands either. The alliance of the Collective Security Treaty Organization (CSTO) and the Shanghai Cooperation Organization (SCO) on the one hand, and the NATO-U.S. bloc on the other are fighting in earnest for the Kyrgyz bridgehead. To make progress, Russia has to gain control of geopolitical and geoeconomic processes in Central Asia and eventually become the central player here." (Obshchestvenny Reiting, December 8.)
The republican media analyzing Russia's energy policy cite Russian analysts who say that the Kremlin's "gas attack" against several post-Soviet republics can boomerang at Russia.
"It would be reasonable to assume that Russia's agreement to pay new Turkmen prices would provoke a chain reaction in Uzbekistan and Kazakhstan, who also supply gas to Russia. Consequently, it will have to raise gas prices again for post-Soviet and European clients, which is fraught with open political conflicts. Many Uzbek and Turkmen specialists say that a rise in Central Asian gas prices would undermine the new price policy of the Russian gas companies in the former Soviet countries, because no one there would accept another price hike." (TRIBUNE-uz, December 9.)
The press has covered Oleg Deripaska's visit to Tashkent. It reports that the head of Russian Aluminum (RusAl) has assured the Uzbek president that his company would not start implementing Tajik projects without the approval of the Uzbek government. The media write about strong political undercurrents, expressing the fear that RusAl would not fulfill its obligations to Tajikistan.
"Experts note that RusAl might fail to honor the agreement regarding the construction of the Rogun Hydro. Tajikistan should make a unilateral decision to revise the implementation of these programs and study Western proposals to create an Economic Cooperation Community of Tajikistan, Afghanistan and Kyrgyzstan." (Millat, December 8.)