The pitfalls in using energy resources as political tools

Kommersant, Moscow, Russia, Friday, December 30, 2005

The Kremlin proclaimed a new CIS policy in 2005. In short, official
Moscow undertook to convert its economic influence in the post-
Soviet zone into political influence. But Russia may soon find
itself without either form of influence.

On August 23, shortly before the CIS summit in Kazan, RIA-
Novosti quoted a senior Kremlin official who insisted on anonymity
that Moscow intended to radically change its CIS policy. “Moscow
cannot help disliking the situation when it essentially subsidies
economies of some countries selling them energy resources at a
serious disadvantage to itself” when “some of the new rules are paid
their salaries, openly or covertly, by the Americans,” the official
said. Foreign Minister Sergei Lavrov developed the thesis later that
day. He said that CIS countries should build relations among them
“on the basis of the world practice.”

Only later it became clear that the words of the official and
the diplomat had not been a boast after all, that it was the
Kremlin’s new policy with regard to former Soviet republics
proclaimed. It was a message to CIS countries that only whichever of
them remained in the Russian orbit could hope to retain economic
privileges and buy energy at a discount. Whichever countries,
however, were bent on rapprochement with the West should prepare
themselves for the worst – bid a fond farewell to cheap Russian gas
with all it implied.

The new policy with regard to the CIS countries was not
generated and formulated overnight. It was the result of a thorough
analysis of color revolutions in the post-Soviet zone. The Kremlin’s
analysts drew at least two conclusions.

[1] First, that CIS countries had drifted so far apart that the CIS itself
existed only on paper and that its territory was rapidly evolving into two
camps – pro-Russian and pro-Western. Vladimir Putin’s words in
Yerevan in March became the first indication of future changes in the
policy. It was the first time Putin called the CIS “an instrument of
civilized divorce” for the former Soviet republics.

[2] The second conclusion the courtier-analysts drew was even more
far-reaching. The West that has successfully orchestrated
installation of new regimes in Georgia, Ukraine, and Kyrgyzstan and
Moldovan President Vladimir Voronin’s “defection” to its side would
not stop at that. On the contrary, the West will continue developing
its success, tearing one country after another from the sphere of
Russian influence. Analysts said that the next color revolutions
could occur in Kazakhstan, Belarus, and Uzbekistan.

More importantly, they became convinced that Russia was the ultimate
target where a new regime might be installed the way they had been
in Georgia or Ukraine in the course of disturbances and instability
caused, say, by deterioration of the economic situation or
aggravation of the conflict in the Caucasus.

The dramatic turn in Moscow’s policy with regard to CIS
countries was designed as a means of prevention of this turn of
[1] Ukraine became the major target of the Russian offensive. For
starters, Gazprom upped gas price for the Orange Regime from $50 to
$160. While Kiev was screaming bloody murder and objecting, Gazprom
boosted the price to $230. Kiev offered Russia control over 50% of
the domestic gas market in return for the promise to up prices step
by step but the northern neighbor was not interested. Moscow chose
to stick to its new strategy.

It doesn’t care that a lot of Ukrainian politicians maintain that Gazprom’s
demands are purely political, that this is how the Kremlin makes
preparations for the parliamentary election in Ukraine where it is
determined to exact vengeance for the dismal fiasco of its protege
Viktor Yanukovich in election of the president last year.

[2] Georgia was chosen for the second target. Instead of the
previous $63, it will have to pay Russia $110 for every 1,000 cubic
meters of gas now. Georgian Minister of Economy Kakha Bendukidze
exclaimed “A high gas price is politics!” but the unruffled Kremlin
repeats again and again that no political considerations are

[3] Moldova is facing a similar problem. The Kremlin hasn’t
forgotten or forgiven the slap in its face that took the form of
official Chisinau’s demonstrative refusal to sign the Trans-Dniester
conflict settlement plan composed in Moscow. The Moldovan
authorities plead with the Kremlin to up the prices gradually but a
flat “No” is all they hear in response.

Declaring a gas war on three CIS partners, Moscow showered its
faithful allies with boons. President Alexander Lukashenko of
Belarus is once again a fierce pro-Russian due to the forthcoming
presidential election. His country will go on paying $47 for the
Russian gas.

The Russian gas offensive in all fronts at once means changes
in the foreign policy and personnel in charge of it. The Foreign
Ministry has always been the agent of the Kremlin’s will in the CIS
until now. These days, however, it is giving way to Gazprom managers
– or so it certainly seems. As far as the Kremlin is concerned,
Gazprom managers wield the only reliable instrument of influence
with the neighbors – gas valve.

In the meantime, the old axiom of intelligence services
(valuable assets have to be cherished) must have occurred to
official Moscow too because it decided not to count on itself alone.
Moscow began recruiting powerful Western politicians for its energy
giants expecting that these politicians will help Russia with
execution of its new foreign policy strategy.

Italian Prime Minister Silvio Berlusconi has been considered
the foremost Russian lobbyist in the West until now. The Russian
leader was assisted by his Italian pal on more than one occasion,
and Italian businesses associated with Berlusconi benefited from his
often scandalous but usually pro-Russian statements.

Settling in the new foreign policy strategy, Moscow set out to
reinforce its lobbyist group in the West with two powerful men – ex-
chancellor of Germany Gerhard Schroeder and Don Evans, President
George W. Bush’s personal friend and former commerce secretary.

Moscow made them offers no sane man would ever turn own. The former
was offered chairmanship in the committee of shareholders of North
European Gas Pipeline Company, operator of the North European Gas
Pipeline. Evans was offered the post of chairman of the board at
Rosneft. The signing of these two contracts would have guaranteed
the West’s benevolence with regard to the new strategy.

Alas, Evans announced on December 20 that he felt he must turn
down Mr. Putin’s offer. Evans’ decision struck a serious blow at the
new strategy – and not only because it put Schroeder under pressure
(he is told in no uncertain terms to turn down the Russian offer).

It is just that shortcomings of the new Russian strategy become
all too apparent even at the initial phase of its implementation.

Economic leverage is a powerful weapon but not omnipotent at all,
and this is the weakest link in the whole chain of the strategy. The
threat to close gas valve would have been a much more efficient
means of dealing with neighbors that its execution. It is clear that
higher gas prices will foment a crisis in the affected countries.

It is also clear, however, that they will overcome the crisis with help
from Europe and America and that Russia will find itself without the
last leverage with these countries. Moreover, orientation of their
economies in the direction of the West will hurt Russia itself. And
what countries of the CIS that haven’t made up their minds on the
Russia vs the West choice yet will see that it is no impossible at
all to do without Russia. (Translated by A. Ignatkin) -30-

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