Command and control
June 14, 2011
Over the years, Europe has become accustomed to winter wars between Ukraine and Russia over natural gas prices. The Ukraine has an inefficient infrastructure that leaves it highly dependant on Gazprom, Russia's state-run gas giant.
In 2009 that dynamic reached an impasse and caused a two week interruption in gas flows to Europe. Long and hard negotiations eventually saw Moscow and Kyiv reach a pricing agreement designed to avoid future disputes.
Now, at the height of the European summer, there are signs the gas wars may flare again - this time in a battle for control over Ukraine's gas pipelines. The country's pipeline network - along with the rest of its infrastructure - is in poor shape. Built in Soviet times, they will require massive investment if they are to provide reliable transit of gas in the years to come.
What Kyiv can't afford, Moscow can. Russia's state-owned energy giant Gazprom is now seeking a partnership with Naftogaz - Ukraine's gas and oil monopoly.
Eyes on the prize
Volodymyr Dubovyk, an international relations expert at Odessa National University, says Russia's ultimate aim is control over Ukraine's gas infrastructure.
"I think that's what they would like to do both in terms of economic interests but mostly and primarily in terms of their geopolitical interests," Dubovyk told Deutsche Welle. "I'm personally not buying the theory of Russian political leaders and decision-makers basing their decisions these days exclusively on economic and business interests."
Ukraine says there are major problems with the agreement it signed with Russia in 2009, and that it's paying too much for Russian gas. But Russian President Vladimir Putin and Gazprom say they're not changing the deal.
Few options
According to Ricarda Rieger, the country manager for the United Nations Development Program, Ukraine is one of the world's least energy efficient countries. But there appears to be little public interest in reducing consumption to lower the nation's dependence on Russian gas.
"Unfortunately the prices are so low that … they are not compelled to do much about energy efficiencies in businesses and housing," she told Deutsche Welle.
At the moment, the International Monetary Fund is keeping Ukraine's economy afloat with a $15-billion loan. The money is conditional on Ukraine increasing domestic gas prices and reducing its deficit. But that's politically difficult for the government and President Viktor Yanukovic.
Odessa National University's Volodymar Dubovyk likens the problem to a junkie's withdrawal symptoms.
"We've been talking for almost 20 years now about diversifying sources of supply of energy for Ukraine," he said. "Imagine for a second real action being done in that direction … the dependence on Russian energy supply would go down. But nothing's been done."
As it stands, Ukraine has little to bargain with when it comes to fending off Russian political influence and Gazprom's financial ambitions.
Bargaining chips
Sergeii Glebov, of Odessa's Mechnikov University, says Ukraine did manage to negotiate a reduction in gas prices in exchange for an extension of Russian Black Sea fleet rights in the Crimea. But this only highlights the extent of political interference in energy policy, he added.
"Unfortunately Russia is very pressing on Ukraine and it has actually resources to do this. Ukraine is too weak to oppose the Russian intentions and Russian policy," he told Deutsche Welle.
Ukraine's other option is to pursue closer ties with the European Union. It's currently negotiating a free trade agreement, but Russia has a record of using gas prices to turn up the heat each time Kyiv looks westward.
"The EU is restricted in their instruments and possibilities to oppose Russian interests and Russian politics in eastern parts of Europe - towards Ukraine for instance because the European Union is also dependent on Russian gas," Glebov said. "That is why the EU should be more attentive to some Ukrainian problems and Ukrainian requests when both sides are negotiating about a free trade zone, for example."
Balancing act
Olga Kamenchuk, director of a Moscow-based public opinion research center, is an expert on both Ukraine and Russia. She says Ukraine needs to work with both the East and the West.
"Ukraine is a direct neighbor of European Union, and Ukraine is a direct neighbor of Russia," she told Deutsche Welle. "They are both interested in developing economic and political ties, and it's important for both of us - EU Europeans and Russians - to somehow find consensus on that."
Ukraine's modernization push shows it can work with both its neighbors. Some infrastructure projects are funded by Moscow, while others are bankrolled by Brussels.
But given Kyiv's dependence Russian gas, many experts believe the mammoth task of upgrading Ukraine's pipelines will inevitably put them in Gazprom's hands. Russian money is, after all, likely to be linked to a deal favoring Russian interests.
Author: Kerry Skyring, Odessa (gps)
Editor: Sam Edmonds