Gazprom, the Russian oil and gas giant
which owns 16% of the world's proven natural gas
reserves and controls 20% of its global
production, has become a decisive geoeconomic
actor.
This is illustrated by Gazprom's
decision on January 1 to reduce supplies of gas to
Ukraine, which in turn are delivered to a number
of European countries. [1] The ostensive reason
was a dispute over pricing of the gas.
Following the European Union's decision to
give Ukraine the
status of a "market economy"
last month, the Russian corporation made a
distinction between Ukraine and Belarus (with
Belarus still being a state-administered economy),
claiming that Ukraine must pay for gas supplies as
much as international markets indicate. According
to Moscow, politically-driven low prices are not
relevant when conducting business with market
democracies.
Austria, Germany, Hungary,
Italy and Romania already pay US$230 per 1,000
cubic meters of natural gas to Gazprom. During
last year's Russian-Ukrainian talks, Kiev claimed
it should pay a lower price due to its proximity
to Russia and its special role of being a bridge
between Russia and the West since the majority of
Russia's natural gas pipelines pass through
Ukrainian territory.
As the crisis became
more acute, Kiev declared last week that it was
ready to pay market prices for gas (it has been
paying about $50 per 1,000 cubic meters), but
asked Gazprom to only progressively raise the
price, which the Russian corporation refused to
do, instead offering just a three-month delay to
implement the price increase.
Obviously,
the market economy argument, although formally
correct, is a pretext to put pressure on Kiev.
Gazprom is acting as an agent of Moscow to
pursue Russia's political interests. President
Vladimir Putin's international economic policy and
Gazprom's policy are marching together. The
Russian president is now in control of the energy
giant, guaranteeing that he will remain a key
player, at least indirectly, even if he fails to
be re-elected in 2008. His main international
strategy is to give Russia the status of a great
power in a new, multipolar world order in which
Russia, China and India will be the main Eurasian
powers.
In Putin's view, friendship with
the US and the West is possible if Russia's
security and interests are respected in eastern
Europe, the Caucasus and Central Asia. But the
European Union's and North Atlantic Treaty
Organization's (NATO's) penetration in the former
Soviet sphere of influence puts such friendship at
risk.
NATO's expansion toward former
Soviet republics is viewed in Moscow as an
unacceptable strategic threat. The battle for
Ukraine - a country that is approaching general
elections in March - is heating up. The reason is
eminently geopolitical: Russia cannot ensure its
strategic security, nor project its power toward
the Black Sea and central European regions, if
Ukraine is a hostile state.
Russia, via
Gazprom, is therefore using its gas supplies as a
political weapon to enhance its influence in
Ukraine and will continue to do so in the next
months. Even though such blackmailing actions will
not help Russia enhance its image internationally,
Putin seems more interested in reassessing
Russia's weight as a great power than in gaining
Western sympathy and approval.
Since
central and western European countries also
largely depend on Russia for their natural gas
supplies, Putin's stance against Ukraine could
endanger European-Russian relations as well. It is
also true that Russian credibility as a reliable
world energy supplier could come into question if
the Kremlin's anti-Kiev move causes serious
regional problems. Apparently, though, the
Russians seem to believe that they can force the
situation precisely as Moscow takes over the Group
of Eight presidency.
Moscow would like to
avoid the deterioration of its relations with EU
members (and especially with France and Germany)
and therefore also wants a solution to the crisis;
however, at the same time it wants to signal to
Ukraine the dangers of a pro-American and pro-NATO
policy.
The Russian-Ukrainian dispute will
be won by the player most capable of getting the
support of Western countries, and, in the end, a
compromise on the modalities of Kiev's payment to
Moscow is the most probable outcome. In this
respect, the option of a Western financial loan to
Kiev, enabling Ukraine to cope with the increased
price, is not to be ruled out.
However,
the current Russian-Ukrainian issue highlights
another crucial point: the rise of a new Russian
capitalism having peculiar characteristics, and
Moscow's geopolitical counter-offensive after
years of setbacks.
Russian capitalism
and Moscow's power projection Statistics
recently made available in Russia show the rise of
a new Russian capitalist model. According to the
Italian financial daily Il Sole-24 Ore, such a
system is first and foremost characterized by
state ownership of no less than 40% of the gross
domestic product. One of the last liberal
politicians in Moscow, Andrei Illarionov - who
left the Kremlin in December - effectively defined
the Russian system as a "corporatist model, marked
by the dominance of big public [state] groups".
Gazprom's recent opening up to foreign
capital also highlights a specific political
strategy to keep the Kremlin's grip on large
Russian corporations. The state maintains control
over 51% of the oil giant's stakes, while the
remaining 49% is split among foreign private
business groups. In doing this, Putin and his
fellow powerbrokers have managed to formally
adhere to market principles while maintaining de
facto control over their strategic assets.
Such a model is set to expand in Russia.
The importance of its reinforcement is obvious and
twofold. On the one hand, it sets the rules for
conducting business in Russia. On the other hand,
it gives the Kremlin the needed leverage to
project its power and influence abroad, with the
fundamental aim to recreate a Russian sphere of
influence from Belarus to Crimea, and from the
Caucasus to Kyrgyzstan.
The bottom
line Politically, the Russian-Ukrainian
dispute will remain central for the first quarter
of the year, with Ukrainian President Viktor
Yushchenko facing an electoral challenge by both
his former ally, Yulia Timoshenko, and his
pro-Russian adversaries.
It is likely that
Putin will try to send a tough message to Kiev and
to a lesser extent, the West, without exacerbating
its complex relations with western European
powers. The EU, under Austrian presidency for the
next six months, is eager to appease Putin and is
unlikely to open a dramatic confrontation over
Ukraine.
However, the effectiveness of
Moscow's strategy in influencing Kiev's electoral
outcome is unsure, and the political battle inside
Ukraine will need to be carefully monitored in the
coming months.
At the economic level, the
gas crisis is set to increase the energy security
concerns of the world powers after years of a
dramatic increase in oil prices. Apart from
ecological issues, fossil energy brings two
fundamental problems: the prices are steadily on
the rise, and the political dependence on
suppliers augments instability.
Therefore,
prospects exist for new and enhanced plans for
ending such dependence. Already in September last
year, a group of European deputies announced the
creation of a broad platform designed to implement
a European hydrogen-based economy in the coming
decades. Additionally, nuclear energy is, once
again, considered to be an economic priority by
many players.
Note On
January 3, Gazprom said it had increased the
amount of gas shipped through pipelines in Ukraine
to assure full deliveries to customers in European
countries. Austria and Hungary, which had suffered
supply cuts of up to 40% after Gazprom cut the
flow to Ukrainian customers on January 1, have
already announced the full restoration of
deliveries from Russia.
Published with
permission of thePower and Interest News
Report, an analysis-based
publication that seeks to provide insight into
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