11. RUSSIA THE GAS-HOLDER

The post-Soviet republics ought to act like truly independent states



EDITORIAL:Vedomosti,
Moscow, Russia, Thu, Dec 15, 2005

[Russia intends to charge some of its neighbors market prices for gas.
Ukraine, Moldova, Georgia, and the Baltic states are paying a price
for their lack of foresight. They can’t seek political independence while
happily agreeing to accept cheap natural resources at the same time.]

Russia took natural gas politics to a new conceptual level yesterday.
Gazprom Deputy CEO Alexander Medvedev stated in Berlin
that the current market price for gas is $220-230 per thousand
cubic meters; meanwhile, back in Moscow, Industry and Energy
Minister Viktor Khristenko promised the Duma that Russia will
make the transition to charging market prices for gas supplied to
Moldova, Georgia, and the Baltic states.

Alexander Ryazanov said a couple of weeks ago that Gazprom
would prefer to charge the Baltic states $120-125 per thousand
cubic meters, rather than the existing price of $80; for Georgia
the figure was $110 (instead of $63) and for Moldova it was $150-
160 (instead of $80). It’s clear why these countries are on the
list: Moldova has a dispute with Russia over the Trans-Dniester
region, Georgia has a dispute with Russia over South Ossetia and
Abkhazia, while the Baltic states keep mentioning occupation and
even demanding territorial concessions. And Ukraine’s sins against
the Kremlin are innumerable.

Armenia, on the other hand, recently agreed to a new gas
price of $110, without any fuss. And Belarus is actually cited by
Miller as setting an example. Yes, it gets the lowest gas price of
all ($47) – but the entire gas pipeline across Belarus is owned by
Gazprom, which also has a long-term lease on the land beneath the
pipeline. So Gazprom seems to be telling its partners: “That’s
what you get for seeking closer ties with the West.” A gas price
of $50 is the carrot held out by Russia.

What’s unpleasant is that the changeover to charging our
neighbors market prices for gas is taking the form of ultimatums.
The scope for muscle-flexing is actually limited. Russia has
already tried cutting off gas supplies completely – during the
conflict with Belarus in late February 2004. Secondly, Gazprom’s
range of potential clients is restricted; the volumes of
deliveries to Europe are stable, as set out in long-term
contracts, so if Gazprom does cut off deliveries to Ukraine or
Georgia, it wouldn’t be able to sell that gas to any other country
at a higher price.

The transition to charging market prices for gas is clearly
in Russia’s interests. But it’s also evident that the governments
of the countries for which Gazprom is deregulating prices are in a
bind. They are not paying a price for political independence.

They are paying a price for their lack of foresight. They can’t seek
independence while happily agreeing to accept cheap natural
resources at the same time. These pricing negotiations should have
been started a long time ago; then it would have been possible to
make the process smoother and extend it over a longer period. But
that wasn’t done.

So, rather than using ultimatums or threats of “technical selection,”
we need to seek compromise options at the talks. Gazprom might
soon have to engage in similar negotiations with European Union
countries. And the post-Soviet republics ought to start living like
truly independent states. That would benefit both them and Russia.

“The main task for the governments of post-Soviet countries
is to make their states strong enough to independently resist the
influence of the United States and Russia,” says political
scientist Robert Jervis, a professor at Columbia University. -30-

– Translated by Ewgeniya Ryzhikova

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