Moscow finally settles into a pre-Christmas peace on the eve of the Eastern Orthodox celebration of Christmas. The city lies under a blanket of snow, frozen deep at -18°C (0°F), as Muscovites turn to festive contemplation or engage in serious drinking. The editorial offices of Moscow's newspapers have been closed for more than a week.
The mood is even festive in the presidential residence, Novo-Ogaryovo, on the western outskirts of the Russian capital. Russian President Vladimir Putin welcomes two important guests to the residence: the head of the Gazprom Group and the Minister of Energy. The two have just declared an end to the natural gas dispute with neighboring Ukraine, and Putin is already envisioning warm cooperation with Russia's Ukrainian brothers on the horizon.
It's almost as if nothing had happened, as if the continent's two largest countries in terms of area had not spent weeks negotiating the price of future natural gas shipments, as if CNN hadn't aired "breaking news" over what it aptly called the "Cold War," complete with live images from chilly Ukrainian living rooms, and as if the leadership of Western countries hadn't expressed concerns about the future, conjuring visions of the distantly removed days of the oil crisis.
And it's as if, only a few days earlier, a saber-rattling Russian defense minister hadn't threatened Ukraine with "fatal" consequences if it refused to play along, and as if the powerful mayor of Moscow hadn't openly asserted Russia's alleged claim to the formerly Russian Crimea. Just before he resigned on New Year's Eve, Putin advisor Andrei Illarionov, as wordy as he is devoid of influence, said that the manner in which Russia was applying pressure to Ukraine was reminiscent of Hitler's threats during the Sudetenland incident.
But then, shortly before the Eastern Orthodox Christmas, on January 7, everything returns to normal. Russia's and Ukraine's top-ranking natural gas officials announce that Russia's Gazprom will follow through on its threat and immediately begin selling its natural gas to Ukraine for $230 per 1,000 cubic meters. Ukraine, for its part, will not be paying more than $95, just as the Ukrainians wanted. The magic formula for this bit of creative arithmetic is complicated, say officials.
The adversaries have hardly stepped off the stage, their heads held high as if they had just left a morning duel without a corpse, as the first congratulatory messages arrive. The deputy chairman of the Russian parliament calls it a "victory of common sense." The leader of the "Fatherland" opposition party says that there are winners on both sides. Finally Benita Ferrero-Waldner, the Austrian-born EU Commissioner for External Relations, lets it be known that she is "deeply satisfied."
Only 200 meters from Ferrero-Waldner's office at Vienna's federal chancellery, a man is bombarded with telephone calls. He is Wolfgang Putschek, a dapper member of the board of directors of Raiffeisen Investment AG, and his job, as his employer's representative on the management board of RosUkrEnergo (RUE), is to turn the puzzling Russian-Ukrainian deal into real money and natural gas.
As part of the Russian-Ukrainian peace treaty, RUE was awarded a contract to mix a natural gas cocktail for the Ukrainians of which one third consisted of expensive Russian natural gas and two thirds was cheap natural gas from Central Asia. RUE's challenge is to arrive at a product that dilutes the high Russian price, almost five times greater than that of Asian gas, thus enabling both parties to save face: the Russians who, in violation of valid agreements, are suddenly charging Kiev's orange revolutionaries "global market prices" for their natural gas; and the Ukrainians, who say they are in favor of a free market economy, but can't understand why they should pay a price that's five times as high as the price the Russians are charging Putin's loyal ally, Belarus.
The affair is difficult, but not impossible to explain for someone like Putschek, a banker who is always consulted when something isn't quite clear -- rumors about natural gas trading company RUE's supposed Mafia connections, illegal earnings or tax evasion. RUE's management board includes Putschek and four high-ranking executives of Gazprom, a monopoly controlled by the Russian government, as well as three of Putschek's colleagues from Raiffeisen. The board meets once a month in Zürich or at the company's headquarters in Zug, a Swiss tax haven.
Everyone knows who the men from co-owner Gazprom represent. Gazprom is the Kremlin's cash cow and Russia's biggest taxpayer. No one knows who Putschek and his colleagues represent -- their sponsors have asked that their identities be kept confidential.
"Respectable businesspeople," says Putschek, adding that everything has been checked. It's "absolutely inconceivable" that Semyon Mogilyevich or someone close to him is behind the company, as Ukrainian intelligence chief Alexander Turtchinov conjectured after an investigation last summer. It's a suspicion that created headlines, because Mogilyevich faces a 390-year prison sentence in the United States for fraud and money-laundering. Mogilyevich allegedly holds Israeli, Russian and Hungarian citizenship, and he has been widely viewed as a Mafia boss for more than 10 years. He is also on the FBI's global most-wanted list. Through his attorney, Zeev Gordon, the fugitive has denied any connection with RUE. The attorney is the same Zeev Gordon who co-founded Eural Trans Gas, RUE's predecessor, to transport natural gas from Turkmenistan to Ukraine. In 2003, the company's profits were estimated at three-quarters of a billion dollars.
Two supervisory board members form the golden Eural Trans Gas days now work as advisors to the Raiffeisen affiliate RUE in its downtown Vienna office -- general agents David Brown and Howard Wilson. The former head of the Eural Trans Gas office in Moscow was promoted to RUE director. The last time Semyon Mogilyevich came to the public's attention was more than a year ago when, in the presence of Russia's top rabbi, Berl Lazar, and Jossif Kobson, a member of the Russian parliament who is faithful to Putin, he donated a tora valued at $50,000 to Moscow's Marina Rosha Synagogue.
It's unclear who in fact is participating in RUE's profits. In Vienna banking circles, it's said that the second half of the company is also controlled by Gazprom's middlemen. If true, that would make Raiffeisen Investment little more than a veil covering an arrangement of the sort that became familiar in the 1990s -- with gas executives lining their pockets in the transfer business. In the future, RUE will be managing revenues of at least $7 billion.
Trustee Putschek refuses to comment on the rumors about Gazprom. "Naturally," he says, one would be justified in asking why the masters of the world's biggest natural gas reserves and the necessary pipelines aren't handling the task of supplying Ukraine and other countries with the fuel -- and why they choose instead to bring in a company that stands to earn hundreds of millions of dollars each year as a result.
But none of this is his business, says the Austrian executive. According to Putschek, RUE is planning an IPO in less than 18 months, at which point the ownership structure will be disclosed. Surprises, such as when two accountants bought the core of the crushed Khodorkovsky empire at auction for more than $9 billion in December 2004 -- only to turn around and sell it to the state-owned oil conglomerate, Rosneft -- also cannot be ruled out in the case of RUE.
However, too much slapstick would be a mistake for the Russians. The country's damaged relationship with the West has suffered even further, and officials at the Kremlin are currently picking up the pieces in the wake of the clash with Ukraine. "Those who wish to be part of the global economy and responsible players must abide by the rules," said an unambiguous US Secretary of State Condoleezza Rice last Thursday, adding that as far as Moscow's role as a reliable energy supplier was concerned, it was "not a good week."
At the end of last year, America's chief diplomat sent her Russian counterpart, Sergey Lavrov, a letter in which she expressed concern over an escalation of the conflict with Ukraine. In Rice's view, the fact that the employees of the partly state-owned enterprise Gazprom nevertheless promptly shut off the flow of natural gas to their southern neighbor on New Year's Day was a mistaken signal, especially on the heels of Russia's assumption of the chairmanship of the G8 group for the first time in its history.
Leading the G8
Putin wants to crown his G8 chairmanship with a glittering summit meeting in his native St. Petersburg in July. The host has already announced that the key issue on the agenda will be the safety of the world's energy supply. Meanwhile, the Wall Street Journal, at the climax of Russia's natural gas conflict with Ukraine, posed a divergent working theory in an article titled "Putin's Mafia Policy." According to the article, Russia's assumption of the G8 chairmanship is "almost as absurd as it would be for Sudan to assume the chairmanship of the UN Commission for Human Rights."
Nevertheless, the chorus of natural gas heavy hitters continues to dominate public opinion in and around Moscow, underscored by nationalistic overtones in the broadcast media. A Gazprom spokesman said Russia has once again proven itself a "reliable partner" for western Europe, and that, after all, the brief decline in gas pressure in Austria, Germany and elsewhere was promptly corrected.
In typically vague management-speak, Gazprom CEO Alexey Miller reported that the "development of cooperation between Russia and Ukraine in the natural gas sector on the basis of free market principles" is finally secure. And in a televised address to millions President Putin himself announced, without so much as blushing, that Russia will now embark on a common future with Ukraine, a future characterized by "partnership, free market principles and transparency."
The West, of course, has fully accepted Moscow's position. In truth, one can draw two conclusions from the intentionally vague treaty, which guarantees a deceptive peace with Kiev. First, the Kremlin has placed its most valuable asset on the line for minor additional Gazprom revenues -- its reputation as an impeccable energy supplier that continues to serve as both a pillar and barometer of the Russian economy a full 14 years after the collapse of the Soviet Union.
Second, Putin and his advisors have ultimately revealed that they are willing to use raw materials as a political weapon. And recent history even provides a precedent for Putin's move. Former Presidents Gorbachev and Yeltsin also threatened to use the gas tap for political ends, by cutting off an uncooperative Lithuania. And in 2004, also under Putin, Russia briefly stopped deliveries to Belarus in an effort to force the country to transfer its rights to the pipelines leading westward as Moscow saw fit.
But what didn't exist before New Year's Day 2006 -- not even, as critics note, in the days when Soviet communist party leaders controlled the natural gas ministry -- is Russia's complete openness about its plans to influence global policy through energy.
Putin must have regarded the 2004 Ukrainian presidential election, when popular favorite Viktor Yushchenko prevailed over the pro-Moscow candidate, Victor Yanukovich, as a Waterloo within Russia's age-old sphere of influence.
For this reason, Belarussian President Alexander Lukashenko, during his meeting with Putin in December, is likely to have asked for assurances that he would be guaranteed his reward for remaining loyal to Russia -- a price of $47 per 1,000 cubic meters of natural gas, or just under one-fifth of the new price that was set for Ukraine.
Under a 25-year contract Gazprom concluded with Turkmenistan dictator Saparmurat Niyazov, the company has become a major buyer of natural gas from the desert state. Gazprom also signed a ten-year agreement over joint development projects with Uzbek dictator Islam Karimov. Finally, plans for a natural gas joint venture were sealed in November with the autocratic regime of Kazakh President Nursultan Nazarbayev.
In the future, the Ukrainians will have to heat and power their homes and factories with Turkmen, Uzbek and Kazakh gas allocated to them by Moscow. In truth, this is the bitterest lesson coming from the Kremlin -- for Victor Yushchenko and the heirs of the Orange Revolution.
Translated from German by Christopher Sultan