Russia plays political games with natural gas

Sunday, January 18, 2009 | 10:00 a.m. CST

Loory: Russia and Ukraine are fighting over supplies of natural gas and as a result the Russian natural gas giant, Gazprom, has turned off the supply. Russia has huge natural gas reserves, selling much of it to Southern and Western Europe.  Most of the supply pipelines go through Ukraine. So when Gazprom turns the gas off to Ukraine, all of the nations of Europe receiving that gas feel the cold. Gazprom says that Ukraine owes it $615 million in penalties for being a month late in payment of its bill. Ukraine disputes the charge. The real dispute is between the leaderships of Russia and Ukraine. Russian officials also say the United States is pulling the strings and creating this conflict. The European Union, whose member states are suffering from this, blame both Ukraine and Russia. Gazprom says it is willing to turn the flow to Europe back on but Ukraine is not permitting it. Why has this dispute escalated to what it is?

Mikhail Zigar, foreign relations correspondent, Kommersant, Moscow, Russia: Russian authorities greatly dislike the current Ukrainian government. Vladimir Putin and Dmitry Medvedev are trying to remove Ukraine President Victor Yushchenko from office in an election year, similar to attempts to remove Georgian President Mikheil Saakashvili last year. They think the gas war will harm Yushchenko’s reputation, as does Gazprom who thinks it will help implement building its northern pipelines in the Baltic Sea. There is also a middleman that buys all the gas from Central Asia and European countries as well and sells all the gas to Ukraine. It looks strange that Gazprom, being a state corporation, is always lobbying the interests of this private and mysterious company.

Loory:  What is the Ukrainian point of view?

Roman Kupchinsky, former director of Ukrainian Service, Radio Free Europe/ Radio Liberty, Arlington, Virginia: The late payment debt of $615 million should have been settled in the Stockholm arbitration court and not used to begin a war which should never have taken place.

Loory: Now, instead of the dispute going to court, it looks like the European Union may bring legal action against both Ukraine and Russia to get the gas flowing again. Will that work?

Brooks Tigner, European defense technology editor, Jane’s International Defense Review, Brussels, Belgium: Not immediately. The E.U. is trying to mediate, flying between the two sides who wouldn’t see each other directly. An agreement was patched together between Gasprom and Naftogaz Ukrainy, the Ukrainian oil and gas company, to allow a team of E.U. monitors in to see if the gas is flowing, but they are not being allowed into the heart of the gas dispatch center.

Loory: Gazprom says that it has turned on the gas but Ukraine is not turning on the valves at its end.

Kupchinksy: The gas was turned on at Sudzha, which supplies gas to eastern and southern regions of Ukraine.  If not, it would have possibly caused social unrest. The Ukrainians have asked Gazprom to turn on the gas at two other entry points, but Gazprom has not done it.

Tigner: The independent observers can’t measure the pressure. No one knows where the truth is.

Loory: Is Germany suffering very much, if at all?

Jörg Jellinek, business reporter, Deutsche Welle TV, Berlin: Not yet, the national reserve has enough gas for 40 days. People worry their houses could be cold like some other parts of Europe; the political pressure is building. Chancellor Merkel is trying to get the Russians and the Ukrainians talking.

Loory: How serious is it in Bulgaria, and what is being done to alleviate the situation?

Ivan Dikov, editor-in-chief, Sofia News Agency, Sofia, Bulgaria:  Things are very bad; all the heating and utility companies are switching to oil. Homes aren’t cold and people are fine, but the economy will drop significantly. About 100 large factories that couldn’t switch to oil had to shut down.

Loory: Will the nuclear reactors that have been shut down, because the E.U. is concerned about their safety, be turned back on?

Dikov: It is rhetoric; it is just being used in discussions. Bulgaria has a Socialist president, considered (to be) pro-Russian. He may talk about turning on a reactor that was closed, but it would take at least one month to restart.

Loory: There is a lot of talk in the U.S. and around the world about increasing the supply of nuclear energy. Is that a possibility in Germany?

Jellinek: German governments have moved away from nuclear plants since Chernobyl. Instead green technologies have increased: solar, wind, bio energy, etc. Eastern European countries may do it now to compensate for gas losses, but the E.U., especially Germany, does not like it. They believe there is no alternative to getting away from gas and nuclear power, as well as oil, to fix our problems in the future.

Loory: What would you do if you had the power to bring some rationality to the natural gas distribution system in Europe?

Kupchinsky: Insist that both Ukraine and Russia return to Oct. 2 of last year, when Yulia Tymoshenko and Putin signed a deal that seemed fair. Russia would grant Ukraine a three-year period to reach European prices. Ukraine would have been allowed to re-export gas to Europe. The middleman would be banned. Unfortunately, Gazprom announced that the deal was no longer valid. Next, the Ukrainian gas pipeline needs upgrading, but it cannot be trusted to only the Ukrainians or Russians, so the Europeans must be brought in to monitor the system.

Loory: This is not only a dispute over finances between Russia and Ukraine, but there are technical problems and political problems beyond setting a reasonable price?

Kupchinsky: Ukraine is not buying Russian gas, it is buying Central Asian gas, sold at a lower price than what Russia sells to Europe. Putin was happy to give Ukraine a price break for years with a political crony, Leonid Kuchma, the former Ukrainian president.

Loory: How is this being used by Russia to try to lure Ukraine back into the fold?

Tigner: Russia is not happy at all with Ukraine’s cozying up to both E.U. and especially NATO. Russian military activity is resurgent in the far north above Norway, where there is also substantial oil and gas reserves. More submarines and strategic bombers are approaching the Norwegian border and turning away at the last minute to announce their presence.

Loory: So this is a reassertion of Russian power within what it considers to be its sphere of influence? How is this felt in Bulgaria?

Dikov: Bulgaria is in a ridiculous situation; no one paid attention for the past 20 years that Bulgaria has only one gas pipe coming in. Ninety-eight percent of our natural gas is from Russia, which could blackmail us if it wanted.

Tigner: This could backfire on Russia. It could lead to substantial spending precisely to better connect a country like Bulgaria, giving weight to the European Commission’s argument for 10 years of boosting gas and pipeline interconnections.

Loory: But, the gas will still originate in Russia and Central Asia, right?

Tigner: No, there are plans for alternative pipelines out of Central Asia, designed to whisk the gas through pipelines away from Russian territory.

Jellinek: The money side is also important because Russia depends on our money as well. Twenty percent of the annual Russian budget derives from gas, they should not forget.

Loory: The real issue is not just how much it costs to produce and transport gas from an underground well in Central Asia to a furnace thousands of miles away, but also attempts by Russia to maintain itself as a power in its part of the world.

Producers of Global Journalist are MU journalism graduate students Jared Gassen, Brian Jarvis, and Sananda Sahoo. The transcriber is Pat Kelley.



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