The announcement, which stated that Ukraine is USD 1.3 billion in debt to Russia’s state-controlled energy giant Gazprom, was widely viewed as a reaction to the strong showing at the polls of the Orange parties and the perceived threat this poses to Russian interests in Ukraine.
Opposition leader Yulia Tymoshenko now looks poised to return to the post of prime minister, and is a long-time outspoken critic of Ukraine’s murky gas agreement with Russia, which features numerous intermediaries and is often portrayed as a vehicle for massive corruption. She has promised to tear up existing agreements, leading officials to brand this latest threat from Gazprom as a welcome back present to Mrs. Tymoshenko.
EU calls for calm
EU officials, ever mindful of the knock-on difficulties to European gas supplies they experienced in early 2006 during Ukraine and Russia’s last politically motivated gas spat, immediately called on both parties to resolve their differences via negotiation.
The crisis appeared over when Prime Minister Yanukovych sent Energy Minister Yuriy Boyko to Moscow to broker a deal which would see the debt cleared by November 1, but with a change of government looking likely it is not clear where this money will come from. Tymoshenko committed herself to repaying the debt but pointed the finger of responsibility at the Yanukovych government and accused it of having allowed the debt to mount up while siphoning money out of state coffers. “State funds intended for Gazprom disappeared into various private bank accounts abroad,” she alleged.
Other commentators have speculated that the debt accumulation was part of a long-term strategy to bankrupt Ukraine’s Naftohaz Ukrainy in order to force Kyiv to cede to Russian state-controlled corporations joint ownership of Ukraine’s strategic gas pipelines in lieu of non-payment.
Ukraine is currently the number one gas transit country for Russian supplies going to the EU market, with some 80% of overall deliveries traveling west via the country’s network of pipelines, and Russia is keen to remove its dependence on transit countries such as Ukraine. As well as attempting to gain ownership rights to existing pipeline networks, Moscow has also initiated a number new pipeline projects in the Baltic and Black Sea regions that would allow them to bypass transit nations and send gas directly to the European market, but they will take some years to become fully operational.
Political pipelines
President Viktor Yushchenko initially denied that there was any debt to address, before going to attack the timing and tone of the missive. “I don’t think that this is a useful declaration. It was not made in a form and at a time that is constructive to good bilateral relations,” he added.
Volodymyr Saprykin, the director of energy programmes at the Razumkov Centre for Economic and Political Studies saw the debt announcement as overtly political and an attempt to influence the rival parties as coalition talks begin. “There is no doubt that it was connected to the election results. It’s a sure way of applying pressure,” he says. The Russian company characteristically denied that there was any underlying political motivation behind this timely announcement.
Ukraine’s troubled relations with its former colonial master look set for a fresh review in light of the country’s likely new government, and this initial incident, coming as it did so soon after Ukraine’s electorate has voted in favour of a return to Orange rule, is a strong indicator that the Kremlin is far from ready to give up the fight for influence in Ukraine.
History of energy attacks
After the collapse of the Soviet Union Russia continued to provide cheap gas supplies to neighbouring former Soviet republics, but in recent years the Kremlin has increasingly sought to impose market prices as former allies have set out on independent foreign policy paths and sought to move out of the Russian orbit.
This has led to accusations that Russia is using its energy resources as a political weapon, and forced Ukrainian officials to look into ways of increasing the country’s energy self-sufficiency.
It is likely that any Orange coalition will face fresh gas supply headaches and price hikes, which will hit Ukraine’s heavy industry hard.
Many of the country’s largest industrial concerns are reliant on cheap gas in order to be profitable.
