> Energy, climate & environment - on 04/03/2009

A suspended sentence for Ukraine before the next gas dispute?

By Laurent VINATIER, associate fellow at the Thomas More Institute, director of the Project on Emerging Actors (Brussels), author of La Russie de Poutine à Medvedev (in partnership, Paris, Unicomm, 2008). Article published in French in "Le Figaro" (March 4th, 2009).

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The next months are likely to be difficult for Ukraine. Being at Russia’s mercy when it comes to energy, the country struggles to free itself from this dependence, a situation leading to predict new trials and painful negotiations in a very uncertain electoral context. Even Russian executives themselves do not conceal that their objective is to make the most of the confusion amongst Ukrainian representatives, at government level in particular, by taking maximum commercial, financial and political advantages. It took only a few weeks to Gazprom’s financial manager Andrey Krouglov to restart the blackmailing and to reinforce the pressure. On February 25th, he announced that “the valves would once again be closed as of March 8th if by then the 400 million dollars debt is not paid”. It is rather unlikely for this threat to be carried out by the company and the Russian state, as spring is coming and as Moscow seems to be worried about the need to pacify its relations with the European Union. However, anything may happen in the autumn, when the electoral battle for the presidential campaign will start in Kiev. Surely Russia would not miss that fight, using the energy weapon to push forward its views, possibly supporting one of the candidates, or at least disturbing the poll.

Ukraine is vulnerable. It is true that, in a sense, ambiguous diplomatic practices of Iulia Tymoshenko at the head of the government do not help stabilizing and protecting the country. Everything happens as if she were managing - even partly - the Ukrainian foreign relations taking only into consideration domestic constraints, which are essentially politicking ones, all aiming to promote her aura and authority in the perspective of the next presidential elections. Looking back to what happened in December 2008, and without doubting Mrs. Tymoshenko’s real will, it would be false to completely exonerate her government from any responsibility in the failure of talks with Russia regarding the price of gas and the amount of the Ukrainian debt. She might have let the situation deteriorate on purpose.

Then, being in Moscow on January 18th, in order to settle - at last - the gas dispute with Russia, she negotiates a very complex agreement, which proves to be restrictive mostly for Ukraine. For example, the price is based on a mathematic formula which is detailed in the document and adjusted every three months; for the first quarter of 2009, gas supply is set at $ 360 for 1000 gas cubic meters. Furthermore, the payment has to be done on a monthly basis, which does not allow for a lot of flexibility in accounting management. Lastly, it is stated that the Ukrainian gas withdrawing cannot exceed 6%, otherwise a more expensive formula - also detailed in the agreement - should apply. No doubt that when Mrs. Tymoshenko goes to Moscow on that day, her room for manoeuvre is not significant. However, it does not seem that she has forcefully defended Ukraine’s interests. On the contrary, she seems to have mostly discussed and obtained the exclusion of the intermediary RosUkrEnergo, thus achieving one of her own personal political goals.

Ukrainian vulnerability should increase until the next presidential elections. And at that time, all of the country’s foreign relations will probably be dependent on Ukrainian leaders’ domestic strategies and positioning. As a consequence, there is a risk for the EU to be impacted by these political rivalries. It may suffer from the lack of scruples of some local actors, ready to play this “two-level game”. By 2010, new gas cuts or other energy dysfunctions should be expected. Given this natural interdependency between Ukraine and Europe, member States and Brussels should react and develop in the country a strategy based on political and financial influence, by offering, beyond existing partnerships, significant support and protection if crises occur. Such a European initiative would offset Russia’s attempts to interfere. And it would aim to strengthen this young and still too unstable democracy, while respecting its sovereignty. We should stop thinking that this election does not affect the Europeans. On the contrary, they have a role to play in it, at least in terms of influence - if not orientation.

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