As a bitter cold snap settles in on the European continent, Moscow's price dispute with Kyiv has begun to inflict collateral damage. Russian gas is no longer flowing to Bulgaria, Croatia, Turkey, Greece, or Macedonia. In Austria, Hungary, Slovakia, the Czech Republic, and Romania it has slowed to a mere trickle.

Since the start of the row on New Year's Day, when Russia's Gazprom cut off gas supplies to Ukraine, Moscow and Kyiv have each tried to portray the other as the villain of the dispute and persuade the European Union to take their side.

"Ukraine is appealing to the EU, and it looks like Russia is also playing the Europe card as well," says Volodymyr Fisenko, a Kyiv-based political analyst. "Moscow is trying to discredit Ukraine in the eyes of European consumers of Russian gas."

For days, Brussels refused to be drawn into the game, even as gas shipments began coming up short.

But now, facing shortages across Eastern and Central Europe, Czech officials representing the EU Presidency have called the impasse "unacceptable."

Deputy Prime Minister Alexandr Vondra suggested the EU was loath to be drawn into what it believes is a bilateral business issue.

"Neither the Czech presidency nor the European Commission considers itself to be an arbiter in what we consider, at its core, to be a commercial dispute between Moscow and Kyiv about future gas prices," Vondra told RFE/RL's Russian Service in a January 6 interview.

Privately, analysts suggest the EU has grown deeply tired of what has become a perennial game of energy brinkmanship played at Europe's expense.

The Second Time As Farce

The EU weathered a similar dispute between Russia and Ukraine in 2006, and another threatened cutoff last year. But Federico Bordonaro, a Rome-based analyst with the "Power and Interests News Report," says that this time Moscow and Kyiv have crossed a line.

"They are [both] certainly discrediting themselves," Bordonaro said. "We can quote Karl Marx here and say that when history repeats itself, it ends up being a farce. It is hard to believe that almost every New Year's since 2006, Europe is faced with the possibility of a severe cutoff in gas supplies because Russia and Ukraine aren't able to find a market agreement."

A quarter of Europe's natural-gas supplies come from Russia, and 80 percent of them are pumped through a network of Soviet-era pipelines in Ukraine. The same network also supplies Ukraine's domestic customers.

On January 1, Russia cut off Ukraine's gas supply, saying that Kyiv owed more than $600 million in back debts. Russia is also seeking to raise the price Ukraine pays for natural gas to $450 per 1,000 cubic meters, which is more than twice what Kyiv says it is willing to pay.

Moscow then accused Ukraine of siphoning off 65.3 million cubic meters of gas destined for Europe via the same pipeline system.

In a televised meeting on January 5, Russian Prime Minister Vladimir Putin ordered Gazprom CEO Aleksei Miller to cut off gas delivered to Europe via Ukraine by 65.3 million cubic meters, thereby causing the current shortages in downstream client countries.

Gazprom says it will make up for the shortfall by pumping more gas to Europe via Belarus and through the Blue Stream pipeline under the Black Sea. Analysts, however, say that alternative is a short-term solution at best.

European Splits

Russia says it simply wants Ukraine to pay market prices for gas. Ukraine, however, accuses Russia of using its energy muscle to undermine the country's pro-Western president, Viktor Yushchenko.

Yushchenko is attempting to lead Kyiv into NATO and the European Union and is likely to face off against Prime Minister Yulia Tymoshenko -- seen as softer on Russia -- in a presidential election next year.

Speaking at a press conference in Kyiv on January 6, presidential economic aide Oleksandr Shlapak accused Russia of using energy as a weapon against Ukraine.

"This is economic pressure on our state and it has nothing to do with real European market prices," Shlapak said. "And as we are facing economic pressure then we have to ask European countries to intervene in the existing situation so we can resolve it together."

Gazprom spokesman Sergei Kupriyanov sought to portray the Russian side as affable partners, telling reporters in Moscow that "Gazprom has been and always will be a reliable gas provider" and that the Russian side is ready "to begin talks at any minute."

A European Union delegation was meeting separately with both Ukrainian and Russian officials on January 6. The EU's energy commissioner, Andris Piebalgs, is due to join EU foreign ministers in Prague for a meeting on the crisis on January 8.

Analysts say European officials understand that Russia is using its energy wealth to pressure Ukraine politically, but they also fault Ukraine for allowing itself to become vulnerable to such pressure.

The gas dispute is all the more fractious because it exploits existing rifts within the EU itself. EU stalwarts like Germany, France and Italy are more eager to maintain good relations with Russia. By contrast, former communist states like Poland, the Czech Republic, and the Baltic countries are historically more sympathetic to Ukraine.

Worry over the current cutoff, however, may trump traditional political causes. Analysts say even Ukraine's allies in Eastern Europe are losing patience with Kyiv.

"The fact of the matter is that the Ukrainian government should know better," says Eugeniusz Smolar of the Warsaw-based Center for International Relations. "On December 31, the Russians will demand, as they do every year, payment for the gas that was delivered. Where is the surprise? Nowhere in the West, regardless of the persuasion of the government, will you find understanding for a situation where you do not pay your bills."

Alternate Pipelines

Analysts say the current crisis could become a watershed that causes both Europe and Russia to rethink their energy policy.

In an effort to decrease Moscow's dependence on Ukraine as a transit country, many observers now expect Russia to step up production on the proposed Nord Stream and South Stream pipelines. Nord Stream would route gas to Europe via the Baltic Sea and Germany, while South Stream would supply Southern Europe via the Black Sea.

On January 3, Vondra warned that Europe could react to the crisis by speeding up construction on pipelines bringing gas from new suppliers by new routes into Europe. One such possibility is the proposed Nabucco pipeline, which would transport gas from Turkey to Europe, bypassing Russia.

The loss of credibility carries costs for both sides. It could deprive Ukraine of crucial support and goodwill from Europe as Kyiv's pro-Western forces, in a season of economic and political uncertainty, seeks greater integration with the EU. And it could derail recent efforts at rapprochement between Moscow and Brussels after relations were severely damaged by Russia's August war with Georgia.

"In the end, I think the Russians have more room to maneuver than the Ukrainians have. But I believe that at the same time, Gazprom will be looked at as a partner that is a bit less reliable than they want us to believe they are," Bordonaro says.

... Payvand News - 01/07/09 ...

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