Russia-Ukraine pact leaves EU all at sea
By Stephen Blank
Russia's new deal with Ukraine on the Black Sea Fleet and gas prices, ratified
in Ukraine's parliament on Tuesday, has profound bilateral significance, as
well as for the Commonwealth of Independent States (CIS) and even Europe. It
ratifies long-term Russian gains at the expense of all the other players and
continues to solidify Moscow's claim to possess a sphere of influence in the
former Soviet Union.
Ukraine had sought to obtain reduced gas prices to cope with its deep economic
crisis. It had three alternatives: the first, which it pursued, was to offer
Moscow a share in a consortium alongside Ukraine and the European Union, to
manage the reorganization of the Ukrainian gas distribution network. Moscow
turned this down as it did not want to be a part of a consortium in regard to
reforming the Ukrainian gas network because it would not have a controlling
share: if there were to be a consortium, Moscow wanted it to be one that it
Kiev's second alternative was to bite the bullet and institute reforms within
its gas economy. Yet, that course would alienate President Viktor Yanukovych's
power base, which depends on cheap gas and non-transparent deals. Such reforms
would also generate momentum towards greater harmonization of the Ukrainian
economy with those of EU members to its West and would thus represent a form of
Westernization over the long term, clearly not something Moscow wanted as the
present situation affords it multiple sources of leverage.
Consequently, Ukraine adopted the new deal under which it receives a 30%
reduction in the cost of gas (from US$330 per thousand cubic meters - tcm - to
$230 per tcm). It obviates the need for a politically difficult reform, allows
Ukraine to formulate a budget without meeting the tough criteria set by the
International Monetary Fund (IMF), satisfies Yanukovych's support, and takes
the controversial issue of the Black Sea Fleet off the table.
It also rescues the troubled Naftogaz Ukrainy, the state company of Ukraine
involved in extraction, transportation and refinement of natural gas and crude
oil, from looming bankruptcy.
However, in numerous ways this short-term deal represents a defeat for Ukraine
and a massive victory for Russia. Their agreement allows Russia to prolong the
stay of its navy in Ukraine's port of Sevastopol until 2042. Kiev loses because
the Black Sea Fleet and its accompanying socio-political-economic-cultural
infrastructure enables Russia to keep the Crimea, and thus Ukraine, in a
permanent condition of de facto circumscribed and limited sovereignty.
Moscow will retain all its points of leverage over Kiev and gain more because
the deal allows Russia to build two nuclear reactors in Ukraine and preserve
its nuclear monopoly there (as an alternative to gas).
Apart from this limitation on Ukraine's effective sovereignty, Moscow also
reinforces its tangible leverage over Kiev by restoring its dependence on
Russian subsidies and preserving Ukraine's non-transparent gas economy. Third,
it prevents Ukrainian democratization and market reforms. Fourth, it thereby
inhibits Kiev's moves towards the IMF, and ultimately the EU.
Fifth, given the navy base lease's duration of 25 years, with an option to
renew for another five years, the deal all but ensures that future Ukrainian
governments will be stuck with a minority controlled by Moscow in the Crimea
and will find it very difficult to move westwards towards the EU or the North
Atlantic Treaty Organization (NATO) until 2042, if not later.
This deal also has profound implications for Ukrainian and European gas
supplies. Russia is intensifying its work with Ukraine on the aforementioned
consortium to restructure its gas network. Nonetheless, with Ukraine firmly
dependent on Russia, Moscow will gain more leverage on it because it is pushing
hard for South Stream, a pipeline project that will essentially bypass Ukraine
as regards supplying Central and Southeastern Europe. If South Stream proceeds,
as Moscow hopes, it will isolate Ukraine from Europe even more.
Similarly, this deal shows Moscow reverting to past practices of subsidizing
neighbors and "special friends" to preserve their dependence on Russia. Moscow
had claimed to abandon this policy in 2005, but never fully managed to do so.
Now, it is clearly going to become a policy once again, and a powerful source
of leverage on Europe and Eurasia.
Indeed, Russian Energy Minister Sergei Shmatko announced that Moscow sees no
reason to revise other contracts, so the price of favorable subsidies for any
other customer will be more dependence on, or subservience to, Russian
Finally, this deal also allows Russia to maintain the Black Sea Fleet, even if
it is not very useful outside the CIS, and continue to try and close the Black
Sea to NATO and use it (especially if Moscow procures the Mistral and
accompanying infrastructure with that ship from France) to intimidate Georgia
and maintain constant pressure on Ukraine.
This is an extraordinarily impressive victory for Moscow, but it is a major
loss for Kiev and the EU, which continue to pay the price of having no
effective energy policy on Russia, or no coherent policy for the members of the
CIS between Belarus and Armenia.
Since nature abhors a vacuum, Moscow has not only filled that space, it has
taken another major step towards consolidating itself as the security manager
of the European CIS.
Dr Stephen Blank is a professor at the Strategic Studies Institute of the
US Army War College at Carlisle Barracks, PA. The views expressed here do not
represent those of the US Army, Defense Department, or the US government.