RT Expert View: Gas déjà vu

Every New Year we seem to hear the same old story – that of an unpaid Ukrainian gas debt and Russia ‘using energy as a weapon’ to get. What does this year bring?

Peter Lavelle, RT’s political commentator and anchor

Russia’s Gazprom has again warned Ukraine that if a new natural gas contract is not in place by the end of the year, the taps will be turned off. Should we expect more theatrics from Kiev? Will it go down to the wire again?

It all appears to be a well calculated game the Ukrainians like to play to generate international sympathy. And this year, we have the added element of dropping gas prices due to the global turndown. How you think all of this will be played out?

Patrick Armstrong, a retired analyst for the Canadian government, specialising in the USSR and Russia

Once again it is time for a new gas supply contract for Ukraine. Once again Ukraine is behind on payments for gas it has already received. Once again, time is running out on the negotiations. Once again Ukraine doesn’t want to pay the going rate.

However, several things are different from the last round of negotiations in 2006. In October, Prime Ministers Putin and Tymoshenko made a general agreement that Ukraine would move to “world prices” gradually – it’s still paying quite a lot less than Germany is. This would argue for a rational settlement of the issue, were it not for the fact that Prime Minister Tymoshenko and President Yushchenko seem to feel that each has to oppose what the other does. The next very important difference is that Turkmenistan is no longer, as it was two years ago, prepared to provide cheap gas for Ukraine. Given that about 60% of the gas consumed in Ukraine comes from Turkmenistan, the price is certainly going to go up from today’s roughly $170 per thousand cubic metres. President Yushchenko has promised that should Gazprom cut Ukraine off, Ukraine will not poach gas going to customers in Western Europe as it did in 2006. Another change is the decline in the price of energy in the last six months.

If these agreements were negotiated as a matter of business – and Russia has already accepted the principle that Ukraine cannot afford to pay “world prices” yet– then the whole issue could be dealt with in a rational manner. We never hear that Germany, for instance, is behind on payments and neither does it create a political fuss when it’s time for a new agreement.

If all runs smoothly, Ukraine’s neighbours will eventually stop subsidising it with cheap gas and people will see Russia’s motive as the perfectly normal one of selling energy for the going rate. And perhaps, should President Yushchenko again call on his Western supporters claiming, “Russian aggression,” they will have learned from their experience with Georgia that there are always two sides to a story.

Mind you, I don’t understand why Gazprom doesn’t just tell Kiev to negotiate whatever prices it can with the Central Asian suppliers and the pipeline companies and keep out of it altogether.

Sergei Roy, editor, guardian-psj.ru

Some Russians who have had the misfortune of spending their summer on the Crimean Black Sea coast, are bringing back strange tales of the behaviour of Ukrainian traffic police: they see Russian license plates, they stop the car and demand payment just on principle, for nothing. If pressed, they come up with this rationale: you are Russians, you are rich, a few hrivnas are nothing to you, and they will go a long way with us.

This seems to be the current Ukrainian “national idea.” All the world lives on credit: Buy now, pay later. Ukrainians have improved on that slogan: Buy Russian gas now, don’t pay ever. At least not until your trading partner has exhausted the entire spectrum of appeals – to Brussels, to recipients of Russian gas in Europe or to Universal Conscience.

As we all remember, at the beginning of 2006 no appeals of any sort helped, and Russia briefly cut off supplies to Ukraine entirely, causing shortfalls among some European consumers and a starting wave of Russophobia. At the time only grumpy business people grumbled that debts must be paid and debtors must pay up or go to the wall. In the eyes of what it known as the “international community” Russia was seen as the bad guy.

Now, two years on, the situation is worse than before. Ukraine has not paid its old debt, only about a third of it, and Ukraine’s president promises another $200 million “soon”. Gazprom says, pay up the full amount (some $2.4 billion) or there will be no new contract for the coming year. No contract, no gas supplies.

Russia also warned Brussels of the coming crisis through an early warning mechanism set up after the 2006 imbroglio, so if Europeans choose to complain about any shortfalls to come, they know who they will have to talk to, and it’s not Russia. Ukraine is a transit country, and the amount of gas on its eastern border must equal the same on the western one.

So what are the possible scenarios as of this moment? As said, the situation is more critical than in 2006. Either due to the global crisis or, as Ukraine’s Premier Timoshenko insists President Yushchenko, in cahoots with the Central Bank chairman, playing dirty tricks with Ukrainian finances. The hrivna has lost half its value against the dollar since the start of the global turndown. So Ukraine does not have enough hrivnas to buy enough dollars to pay its debt to Gazprom.

This is point one. Point two is even more serious: if Ukraine has no funds to pay its old debt, what is it going to use for money to pay for gas in the coming year, especially considering that its price will rise more than twofold, from $179 to $400 per thousand cubic meters? Answer: steal the gas it needs to survive. Just like it has been doing all these years since independence – stealing gas and making billions for the “gas princess” Timoshenko and other members of the Ukrainian elite.

Then a further question suggests itself: Will Russia and its European partners stand for it?

Well, the Europeans could pretend that it’s a matter between Russia and Ukraine only, like they did in the past. It’s a very comfortable position: on the economic side, Russia is expected to supply gas as per contract, and we don’t care how you do it; on the political side, Russia can be accused of using its energy supplies as an instrument of political pressure.

So it all comes to this one point: Russia’s readiness or otherwise to stand firm and demand her money. The money is being taken away from Russians who are losing their jobs, more of them with every passing day. Russia needs the same things as all financially hard pressed countries, funds for people on the dole, public works, retraining programs, bailout programs for ailing companies – everyone knows the litany by now.

There is one more reason for Russia to stand firm, which Gazprom need not mention – because everyone in Russia is aware of it. There is a guy called Konovalyuk, in the Ukrainian parliament, who heads a parliamentary commission of inquiry into the conduct of Ukraine’s president, its defence minister, and similar characters before and during Georgia’s aggression against South Ossetia. Some of the facts they have brought to light positively stink of aiding and abetting the aggressor. There’s the sale, for peanuts, of Ukrainian military hardware, including the most advanced types, to Saakashvili not only in preparation for the assault on Tskhinval but during the hostilities. More than that, Konovalyuk says he has lists of Ukrainian servicemen who fought against Russia during the conflict itself, and quite a few other extremely interesting documents.

In this context, supplying free gas to Ukraine would be too much like offering the left cheek after one has been hit the right. Highly moral, of course, but hardly the proper basis for sound business practice.