A deal is reported to have been reached that will see the flow of Russian gas into Europe resume shortly. Although the pricing dispute between Moscow and Kyiv seems as intractable as ever, Russia has agreed to turn on its gas if international monitors observe the pipelines at their entry and exit points through Ukraine.
Details of the final arrangement have not yet been released, but Gazprom rejected earlier proposals because they did not include monitors that were Russian nationals. The NYT:
Russia, which first cut off gas shipments just for Ukraine, on Wednesday cut off all gas exports to Ukraine, including those destined for Europe, saying Ukraine was diverting some gas for its domestic use. Earlier on Thursday, the two sides had seemed close to agreeing on a plan to place independent monitors in Ukraine to see that the gas was going where it should.
But European Union officials in Brussels said that the deal unraveled when Russia insisted that the monitoring group include representatives of Gazprom, the Russian gas monopoly, and the Russian Ministry of Energy. Ukraine — which has had tense political relations with Moscow since the so-called Orange revolution of 2004 that installed a pro-Western government — refused to accept the condition.
The pricing dispute centers on Russia’s desire to sharply raise the price for the gas it sells to Ukraine, as well as Ukraine’s desire to raise the fees that it charges Gazprom to ship gas to the European Union. Gazprom is seeking to raise the price Ukraine pays for gas to $450 per 1,000 cubic meters from $179.50 last year. Ukraine has reportedly offered a little more than $200 per 1,000 cubic meters. Russia also wants to collect what it says are fines for late payments on previous shipments.
Both Ukraine and Russia are partially to blame for the current crisis, one analyst said:
While there are political overtones to the dispute, most experts attribute it primarily to commercial interests. “The genesis of this is in Russia’s move away from barter agreements with the former Soviet republics toward market prices,” Andrew Neff, an energy analyst at IHS Global Insight in Ankara, Turkey, said. “You can blame either one, but both sides seem to have shot themselves in the foot.”
Ukraine is gambling that the longer the dispute continues, the more likely that Gazprom will have to give in and offer it subsidized gas, he said. And with many Europeans facing the prospect of unheated homes, Russia’s refusal to resume exports over the question of monitors would probably strike many as pure obstructionism.
It it’s fair that Gazprom be paid the market value for its product, it also seems equally fair that Moscow accept the Euro-Atlantic aspirations of its neighbor. Some recent remarks by Putin offer a glimpse of the political nature of the spat. The FT:
The political atmosphere worsened after Mr. Putin accused the Ukrainian government of being a “criminalized regime” that was “incapable of organizing a normal market economy.”
Pot, meet kettle.
Peter Cassata is associate editor of the Atlantic Council.