Radical Noesis - Thinking outside the box

The Ukraine has withdrawn all of its troops from Iraq. While that was not a sizable number, it may be a signal of more that withdrawn support for the U.S. invasion of Iraq. The Ukraine has linked the gas crisis to the 1994 non-proliferation treaty that guarantees to protect the security of the country. Russia claims that the security claims are baseless. There is also a threat to review the Russian Naval Base lease in Crimea - a move that Russia warns could be 'fatal'. The bi-lateral agreement on the base in part recognizes the mutual borders of Russia and the Ukraine.

The increased cost of gas will also increase the consumer cost to the people of the Ukraine.

To add fuel to the fire, the Ukraine has threatened to increase the tariffs on Russian gas shipments across the country from $1.75 per 1,000 cubic meters to $2.50.They have also decided to not restore the free economic zones, and Priority Development Territories (PDI). Apparently because it feels they are a threat to the domestic agricultural economy. However, this could also remove some of the Russian economic influence over Ukrainian food safety.

While this conflict threatens to escalate into a total break between Russia and the Ukraine with potential military actions being not so covertly threatened, it also potentially affects the European Union. The EU gets about 50% of its gas from Russia, and 80% of that passes through the Ukraine. A dramatically increased Ukrainian tariff on Russian oil could effect gas prices throughout the EU. Of course, an armed conflict between the Ukraine and Russia could also cause problems for the EU - particularly for the former Soviet Block countries.

Underlying the gas deals and the conflict is Gazprom - which holds a monopoly on Russian natural gas. Gazprom is a private corporation in Russia that supplies almost one-third of the global natural gas supply. It also accounts for about 10% of the Russian economy. Gazprom was a state-owned industry that has been in the balance in the new Russian capitalist economy.

Gazprom is also the center of an economic and political power struggle that embroils a lot of the big players - including the United States (see Russian Oil: The Plot Thickens). Gazprom was a state owned industry privatized in the shift from a communist to capitalist economy. More recently, Putin has been attempting to reabsorb Gazprom through suits for unpaid state taxes. This move would divest the relatively new Russian "oiligarchy" of their gains, and perhaps set up the lucrative situation of privatizing it all over again.

Regardless of the underlying machinations, the Ukraine sees Russia's actions as punishment for their pro-U.S. policies. The hostilities are becoming more than a shouting match with some of the thinly veiled military threats. Given the EU's (and China's) dependence on Russian gas, this conflict has the potential of triggering massive disruption on a number of levels.