Says demand was a sign of resurgent Russian imperialism
“Energy weapons are being used against neighbors.”

By Vladimir Isachenkov, Associated Press Writer
Moscow, Russia, Saturday, December 31, 2005

MOSCOW – A former Kremlin adviser denounced Russia’s New Year deadline for Ukraine to accept a massive gas price increase, saying Saturday the demand was a sign of resurgent Russian imperialism. Europe, meanwhile, warily watched the standoff amid warnings that its supplies could be affected.

Russia’s state-owned gas monopoly, OAO Gazprom, has threatened to cut supplies to Ukraine Sunday morning if Kiev does not agree to pay $230 per 1,000 cubic meters of gas – more than four times the current price. The company has said the price hike marks a long-overdue transfer to free-market price mechanisms.

However, Andrei Illarionov, a former economic adviser to Russian President Vladimir Putin, said the increase instead was a political move signaling the rise of neo-imperialist trends in Kremlin policy.

Illarionov said the Kremlin had asked him to help cast the price hike as a free-market measure, but that he resigned this week because the move “had no relation not only to liberal economic policy, but to economic policy at all.”

“Energy weapons are being used against neighbors,” Illarionov said on Ekho Moskvy radio. “The move toward a policy of imperialism … has a clear and high price that will eventually be paid by the citizens of a nation that embarks on the imperialist path.”

Russia supplies about half of the European Union’s gas, most of which flows through Ukraine. Gazprom informed European customers that, once it stops deliveries intended for Ukrainian use, supplies to other countries could be restricted if Kiev siphons off gas meant for transit further west, company spokesman Sergei Kupriyanov said.

Ukrainian President Viktor Yushchenko’s office said his Cabinet introduced measures to ensure the unhampered flow of gas into Ukraine and its transit to EU countries until a new contract was signed. But his prime minister has said Ukraine has the right to take 15 percent of shipments through its territory as transit fees.

EU Energy Commissioner Andris Piebalgs said he was concerned about the Russian threat, but was confident an agreement would be reached “and that Russia and Ukraine will honor their commitments to supply European gas markets as they have at all times in the past.”

The showdown has underlined the tension boiling between the historically linked, mostly Slavic ex-Soviet republics since Yushchenko won the presidency a year ago on the wave of the “Orange Revolution” protests against election fraud. It threatens to dominate the New Year holiday, a big one in both countries.

Ukraine wants any increase toward world-market prices to be phased in gradually, and Yushchenko said late Friday that his country could now pay $80 per 1,000 cubic meters at the most.

Yushchenko was speaking during his televised New Year’s address, which followed a carefully staged TV broadcast by Gazprom’s head who emphasized the company’s plans to shut off the valves on New Year’s Day.

“The actions will be precise and resolute,” said Alexei Miller, reiterating that the company would halt supplies to Ukraine at 10:00 a.m. Sunday unless a new contract was signed.

With no sign of progress toward a deal, Yushchenko proposed earlier Friday to freeze prices for the first 10 days of January to give both countries’ companies extra time to negotiate a deal.

Putin’s press service said the Kremlin had not received the tele gram containing the proposal, and there was no reaction from the Russian leader. But Gazprom criticized the proposal, saying that accepting it could lead to indefinite delays.

Illarionov said that in August 2004, Gazprom signed a deal with Ukraine’s gas company that envisaged five years of gas supplies at $50 per 1,000 cubic meters – part of the Kremlin’s efforts to support presidential candidate Viktor Yanukovych, who lost a tense race last fall to the Western-leaning Yushchenko.

“When the political situation changed, they remembered about subsidies,” said Illarionov, who long had been a dissenter in the Kremlin, which is dominated by Putin’s fellow veterans of the Soviet spy agency KGB.

Illarionov likened Russia’s price hike for Ukraine to Nazi and Soviet ultimatums issued to Eastern European nations before their annexation on the eve of the World War II, and urged the Kremlin to step away “from the brink of a precipice that we are approaching so blindly and quickly.” -30-

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