Russkie Knife in Back for Ukraine

The 'oil weapon' realized...
I only predicted it about ten years ago...

For educational purposes:

"Fears of new cold war as Russia threatens to switch off the gas
>>From Jeremy Page in Moscow

PICTURE the families shivering in apartments without heating, factories
grinding to a halt, frozen water pipes bursting in the depths of
winter. Welcome to the new Cold War.
At 10am on Sunday, Russia is threatening to unleash the most powerful
weapon in its post-Soviet arsenal: unless Ukraine agrees to a fourfold
increase in the price it pays for gas, Russia will simply turn off the
tap.

Nor is it just Ukraine under threat - the EU imports about half of
its gas from Russia and 80 per cent of that comes through Ukrainian
pipelines.

So when President Putin met Ivan Plachkov, the Ukrainian Energy
Minister, in Moscow yesterday, there was more at stake than relations
between the neighbouring states. Analysts fear the dispute could
provide a foretaste of how Russia will use its massive oil and gas
reserves as a foreign policy tool in future disputes with the West.

"Energy co-operation has replaced military might as the mainstay of
Russia's international credibility," Chris Weafer, chief strategist
at Alfa Bank in Moscow, said. "It is using its importance as an
energy partner to pursue its geopolitical and foreign policy agenda."


The dispute began when Russia, which supplies a third of Ukraine's
gas, demanded that Kiev agree to pay $220-$230 (£128-£133) per 1,000
cubic metres, compared with the $50 it had previously paid instead of
transit fees for gas heading to Western Europe.

Gazprom, the Russian state gas monopoly, said it was simply phasing out
subsidies that Ukraine no longer needed since the Orange Revolution
last year set it on the path towards integration with the EU. The only
possible compromise, it said, was for Ukraine to sell part of its
pipeline network to Russia.

Ukraine said that it was willing to accept a smaller price increase,
phased in over five years, but ruled out selling its pipelines, which
it sees as a strategic asset.

Then things started to get nasty. Aleksandr Medvedev, Gazprom's
deputy head, threatened to cut off Ukraine's gas supplies at 10am on
January 1 if Kiev did not back down.

Ukrainian officials then suggested that its neighbour should pay more
for rental of the Black Sea port of Sevastopol, where the Russian
Southern Fleet is based. Sergei Ivanov, the Russian Defence Minister,
said that would be fatal. Yuriy Yekhanurov, the Ukrainian Prime
Minister, fuelled the fire this week by saying that Kiev had the right
to take 15 per cent of Russian gas shipments to Europe as a transit
fee. Gazprom said that would be theft.

President Putin proposed a compromise yesterday, offering to lend
Ukraine up to $3.6 billion to ease the transition to the higher price.
He scolded negotiators on both sides for failing to reach a deal.
"You created a crisis not only in the energy sphere. It looks very
much like a crisis in interstate relations," he said. "That is very
bad."

But Ukraine rejected his offer. Its officials accuse the Kremlin of
trying to punish Viktor Yushchenko, their President, for turning his
back on Russia and pursuing membership of the EU and Nato. They also
suspect that Moscow is helping Mr Yushchenko's pro-Russian rival,
Viktor Yanukovych, to stage a comeback in parliamentary elections in
March.

Gazprom, they point out, has raised gas prices for other former Soviet
republics, such as Georgia and Armenia, to $110 - and it has agreed
to sell gas to Belarus, a staunch ally, for a mere $46.68.

But analysts say the reform is not just about Ukraine: it is part of
the Kremlin's broader strategy to gain control of Russia's energy
reserves and export routes and to use them to reclaim its world power
status.

A year ago, the state oil company, Rosneft, swallowed up most of
Russia's biggest private oil company, Yukos. Then in October Gazprom
bought the fifth-largest oil firm, Sibneft. The net result is that the
Kremlin now controls 30 per cent of Russia's oil reserves, and all of
its gas supplies and pipelines.

Within the next ten years, Russia aims to be at the centre of a
spider's web of oil and gas pipelines feeding all the major world
markets. That would be welcomed by countries anxious to meet the
growing demand for gas and to reduce their reliance on the volatile
Middle East.
But it leaves the EU dangerously dependent on a country with a history
of political instability and aspirations to reclaim its superpower
status.

Mr Putin has promised the EU that Russia will not use oil and gas
supplies to blackmail other countries. But Mr Yushchenko says that the
current dispute proves otherwise, and the EU is under pressure from
several members to intervene.

Ukraine has enough gas to last the winter - when temperatures can
drop as low as -20C (-4F) - if Russia does turn off the tap.

"Not one Ukrainian family will be cold in the winter," Mr
Yushchenko told NTN television yesterday. But Ukrainian officials have
urged people to conserve energy, just in case."
....

Maybe pooety will send Gerhardt out with a monkeywrench to turn off the
valves.

.

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