Sunday, January 01, 2006

Happy New Year's, Ukraine - you should have looked at Georgia

Apparently the near-sightedness of people regarding Russian energy goals and influence extends to Ukrainian leadership. They thought Russia was bluffing when it said that unless Ukraine accepted a deal Gazprom would shut off gas to Ukraine. Surprise surprise, the deadline came and went and Gazprom started reducing pressure in the pipeline, threatening not only Ukraine but all of Western Europe.

Already, the tension is rising - with Gazprom accusing Ukraine of unauthorized tapping off the pipeline. Which would mean that the amount of gas reaching Europe is going to be insufficient.

Again, however, I am somewhat surprised that anyone would think Russian energy companies bluff. Take a couple of examples.

In 2002, in 2002, Transneft slowly began cutting off shipments of oil to the Ventspils terminal in Latvia, a port owned and operated by the Latvian company, Ventspils Nafta and rerouting oil to the Russian port of Primorsk. Russia, unhappy with the Baltic countries' independent path, maneuvered one of the most important and financially significant Latvian companies into a position where it suffered a 98% slump in profits in 2003. Although Ventspils Nafta rebounded, Russia showed Latvia through control over energy who's boss.

Similar strong-arm tactics were used by Yukos vis-a-vis Mazeikiu Nafta, the Lithuanian oil refinery.

A more important parallel can be drawn between Ukraine and Belarus and Georgia and Armenia. Georgia had its Rose Revolution and has maintained a pro-Western, anti-Russian position. Armenia is friendly with Russia. Russia controls almost all of Armenia's energy sector, but has never threatened to shut things down. Georgia on the other hand...well, as I said, it's not just the media that's myopic. Ukraine should have looked towards Georgia to see what happens to those who oppose Russia.

In July 2004, growing tensions between Russia and Georgia over the pro-Moscow separatist region of Georgia, South Ossetia, led to the shutting off of Russian gas to Georgia by Gazprom (amazing how Gazprom crops up in this picture as well, isn't it). Georgia is entirely reliant on Russian energy and has struggled to pay its outstanding debts. Gazprom’s ostensible reason for the shut-down was unpaid back dues from Georgia, but it is clear that the Russian government’s tensions with Georgia prompted the actions.

Sound familiar?

Moral of the story (and pardon my French): Don't fuck with Russia. And if you're going to fuck with Russia, don't be surprised when you encounter problems with energy supplies. Also - Russia doesn't bluff when dealing with the former Soviet republics. It doesn't need to. It's much too powerful to have to resort to some half-ass poker technique.


Anonymous Kira Zalan said...

Many are labeling Russia’s pressure on Ukraine to pay market prices for natural gas as “Cold War” tactics. Of course, the Ukrainian government is paying the full price for their anti-Russian rhetoric and pro-Western orientation. Russia is flexing the only muscles she has: natural resources. But, it’s not so much a message to the Ukraine as to the West. And it’s not so much “Cold War” as Realist geo-politics.

Putin quickly realized that Russia only has one card to play in today’s world of growing demand for natural resources. Domestically, this realization became clear with the takeover of the Yukos oil company. Disguised as retribution for legal transgressions, Putin removed the threat of a western-oriented Yukos
by imprisoning its managers, and paved the way for a predictable government takeover of Russia’s oil industry. Today, it is not so clear what the rules of oil investment are (i.e. no foreigner shall hold majority stock in a Russian oil company), but it is very clear who makes the rules.

5:43 PM  

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