Another Winter of Discontent Europe Fails to Wean Itself off Russian Gas
The dispute between Russia and Ukraine seems to have been resolved, but the question of blame remains. Did Moscow deliberately risk allowing half of Europe to go without heat merely to teach Kiev a lesson? Whoever is to blame it is clear that neither Brussels nor Berlin did much over the past few years to avert the crisis.
Oleg Dubina, 49, the chairman of the Ukrainian state-owned energy company Naftogaz, looks like he has been up all night. With deep rings under his hooded eyes, he sits in conference room ASP 5G3 at the European Parliament in Brussels. Dubina is considered the most adept crisis manager in the former Soviet republic.
When he flew to Brussels via Moscow last Thursday his most important, and no less cunning, opponent in the current game of poker over natural gas in Europe was sitting only a few seats away: Alexei Miller, the head of the Russian gas company Gazprom. On that same day, Europeans were growing increasingly indignant over the consequences of the latest natural gas dispute in the eastern part of the continent.
A pipeline near the Russian-Ukrainian border on January 11, 2009. Russia promises to restart the flow of gas on Tuesday.
Russian gas stopped flowing through Ukrainian pipelines toward the West last Wednesday, and even Germany was affected with empty pipes at its pipeline hub in the Bavarian town of Waidhaus. In Bulgaria kindergartens and schools were forced to close, several automobile assembly plants were shut down in Slovakia, and in Novi Sad, Serbia's third-largest city, 80,000 people found themselves with no heat. Even the government in Washington protested the action, noting that it was "unacceptable" to cut off the supply of gas to "vulnerable people" in the middle of the winter.
All of this happened because, at the beginning of the year, two neighboring countries were unable to agree on how one would pay the other for gas deliveries.
But once the two men arrived in the Belgian capital they quickly realized how much the EU lacked a concept, even in the gas crisis. Instead, there was a lot of helpless squabbling. In a special session of the EU Committee on Foreign Affairs on Thursday, members of the European Parliament sharply criticized both the Russians and the Ukrainians. Socialists threatened to take retaliatory action, while an angry Bulgarian was reminded of "memories of Stalingrad." In the end, the Brussels EU administration assumed the role that the gentlemen from the East had concocted for it: that of the fleet-footed messenger.
The fact that the Russians were unwilling to negotiate with the EU and Ukraine at the same time meant that EU Commission President José Manuel Barroso and his energy commissioner, Andris Piebalgs, were forced to traipse back and forth between the two fronts, presenting what Dubina had demanded or rejected to Miller, and vice-versa. "It would be best," Piebalgs said, summing up the helpless mood in Brussels, "if Ukraine and Russia would resolve the problem on their own." And that was exactly what eventually transpired. Without a solution having been reached, Miller and Dubina flew back to Moscow on the same flight. Then, late on Thursday evening, it seemed there was good news: Moscow would begin the flow of gas to Europe again. German Chancellor Angela Merkel had proposed bringing in international experts who, under German supervision, would monitor Kiev to make sure that it does not divert any gas from the transit pipelines.
The Wrath of Berlin and Brussels
However, the two countries remained in deadlock with Russia objecting to the fact that Ukraine attached a declaration to the deal with additional conditions on Sunday. Kiev then finally accepted and signed the original deal without the concessions on Monday which prompted Gazprom Deputy Chairman Medvedev to tell a news conference in Brussels said that supplies to Europe should resume on Tuesday.
Former German Chancellor Gerhard Schroeder (r) with Russian Prime Minister Vladimir Putin back in 2005.
But hadn't the heads of companies in the German energy sector, like the CEO of chemical giant BASF, repeatedly insisted that Gazprom, though not always easy to handle, was a "consistently reliable partner?" Hadn't German Foreign Minister Frank-Walter Steinmeier lobbied on behalf of the strategic partnership with the Russians, especially in the interest of "energy security?" And didn't his old boss, former Chancellor Gerhard Schröder, who now sits on the board of Gazprom-owned Nordstream, allegedly say only last week in St. Petersburg that Russian policy is characterized by the fact that "European gas consumers are not forced to suffer because of disagreements between trading partners?" A comment which his spokesman later denied even though the remarks were printed on the Web site of his partner, Russian Prime Minister Vladimir Putin.
No Action in Three Years
It was been three years since Russia and Ukraine had it out on the backs of European consumers when, at the very start of 2006, Western Europe's gas supply was interrupted for three full days.
That incident triggered enormous dismay and a barrage of grandiose statements by Western politicians. The EU and the German government both demanded that Western Europe's dependency on Russian energy deliveries had to "be reduced dramatically," and that it should diversify its procurement of natural gas and other commodities as quickly as possible.
Specifically, politicians called for the construction of terminals in Germany to process shipments of liquefied natural gas (LNG) from the Middle East and Africa, expansion of existing storage capacities and building new pipelines.
That was less than three years ago, but virtually nothing has changed since then.
As a result of the German government's decision to phase out nuclear energy and the rising costs of CO2 emissions from coal-fired power plants, large quantities of precious natural gas will have to be used to generate electricity in the future. This, say experts, will likely lead to a doubling in imports in the coming years, as well as even greater dependency on Russia. This, in turn, increases Germany's risk of being affected by conflicts in Eastern Europe.
Laying the Groundwork for Conflict
After the 2006 crisis, Russia and Ukraine reached a new agreement and promised their trading partners in Brussels, Berlin and London a "stable supply for Europe." There was talk of special arbitration proceedings and of taking the interests of Russia's natural gas customers into account.
Against this background, experts at the Chancellery in Berlin were all the more dumbfounded when Russia and Ukraine reignited the same conflict last week. Only this time their positions were more entrenched and more incompatible than ever. Experts at the Economics Ministry in Berlin concluded that this time the outages were more extensive, lasted longer and caused greater damage than three years ago.
Pipelines from Russia to Europe
On the Friday before last, Ukrainian Energy Minister Yuri Prodan delivered thick packets containing copies of his government's account statements to the Chancellery in Berlin. The documents were intended to prove that Kiev, contrary to Russian claims, had paid all of its outstanding gas bills.
Four days later, Gazprom Deputy Chairman Alexander Medvedev delivered precisely the opposite message to German Economics Minister Michael Glos. Moscow's demands had not been met to date, he explained, and he alleged that Ukraine was illegally diverting gas from the transit pipelines. As proof, Medvedev presented the Germans with detailed readings on gas volume and pipeline usage. Citing his records as evidence, he told Glos that Russia was doing everything it could to bring the gas to the German border.
The government in Berlin was not in a position to determine which of the two parties was right. Last week, no one outside Moscow or Kiev knew what was happening at the eight border crossings in the Russian-Ukrainian pipeline system. Moscow was merely holding back the gas that the Ukrainians would have stolen anyway, Russian Energy Minister Sergei Shmatko reassured Vice Chancellor Frank-Walter Steinmeier. "We are more concerned about something else," Steinmeier replied, "namely that less gas is reaching us."
Steinmeier and his advisors registered, with growing concern, that the Russians had acted with everything but unanimity, and ineptly to boot. Once again, say members of Steinmeier's staff, Moscow has managed to emerge as the culprit, even though most of the blame seemed to lie with Kiev at first.
- Part 1: Europe Fails to Wean Itself off Russian Gas
- Part 2: Political or Economic Motives in Moscow?