Russian Gas: Pipelines, Politics and Money

By Peter Fedynsky Moscow 11 November 2009

Russia's Prime Minister Vladimir Putin

Russian Prime Minister Vladimir Putin has warned Ukraine he will cut off the country's gas supplies if it siphons fuel from export lines. Mr. Putin made the statement in Moscow following a meeting with Austrian Chancellor Werner Faymann. His warning carries an implicit threat that Europeans this winter could again face shortages of gas they receive from Russia via pipelines that go through Ukraine.

Russian Prime Minister Vladimir Putin has been discussing energy with European leaders much of this past year. He met with the prime minister of Hungary in May to speed construction of the new South Stream gas pipeline from Russia to Europe, a pipeline that will not transit Ukraine.

In October, Mr. Putin discussed the project with his Italian counterpart. Following talks on November 2 with the Danish head of government, Mr. Putin issued a sharp warning that Europe should help pay for deliveries of Russian gas to Ukraine.

The Prime Minister says Russia has already paid Ukraine $2.5-billion for transit and urges Europeans to throw in, as he puts it, "a lousy billion". Mr. Putin bluntly comments, "Why have they become so stingy down there? They have money, too. Let them get something out of their pockets."

Russia's Primer Minister Vladimir Purin(r) and his Ukrainian counterpart Yulia Tymoshenko

Ukrainian Prime Minister Yulia Tymoshenko says her country paid Russia $500 million for October's gas bill. She also alleges President Viktor Yushchenko blocked payments usually made through the Ukrainian National Bank. Mr. Yushchenko, in turn, has criticized Ms. Tymoshenko for negotiating a gas contract that favors Russia. Both are candidates in a January presidential election.

Russian National Energy Security Fund Director Konstantin Simonov agrees with both accusations. He says Ms. Tymoshenko obligated Ukraine to pay for gas it does not use. And Simonov says the Ukrainian president has his eye on the upcoming election.

The analyst says President Yushchenko and those close to him are concerned, above all, with their own re-election. Simonov says for them it is clear their only chance to stay in power is to organize a major disruption, and in that regard, a gas war with Russia is an ideal scenario.

Estonia's Defense Minister Jaak Aviksoo

Meanwhile, Finland and Sweden in early November approved construction of the Nord Stream pipeline in their waters. Nord Stream would also circumvent Ukraine, delivering Russian gas to Northern Europe under the Baltic Sea. But Estonian Defense Minister Jaak Aviksoo accuses Moscow of playing politics.

"The decision to have the Nord Stream as well as South Stream bypassing a number of central Eastern European countries is clearly a political decision," said Jaak Aviksoo. "And unfortunately these countries not being consulted feel themselves somehow out in the cold."

European countries are also considering construction of yet another pipeline, Nabucco, which is backed by the United States and would circumvent Russia with supplies of Asian or Middle Eastern gas.

Harvard University's Marshall Goldman told VOA that Moscow is seeking to prevent such pipeline competition by playing European countries against one another.

"We will make a special deal with you, we will give you a discounted price, sign up with us and you will be protected," said Marshall Goldman. "We will not cut you off.' And this kind of leads to disruption in any kind of united front that might otherwise stand off against the Russians."

Konstantin Simonov

Konstantin Simonov warns that Europe cannot replace the huge volumes pumped by Russia with Nabucco's relatively small annual capacity of 31 billion cubic meters. He also questions the reliability of Nabucco's potential suppliers.

Simonov says he wants to ask Nabucco backers if they have been in Turkmenistan. Have they been in Iran or Egypt? Do they not have any reservations that those countries are much more capable of politicizing the energy dialogue [than Russia]? Simonov says he does not think his country is using gas as a political weapon, but has, instead, a different problem - it wants to make lots of money.

Simonov cautions that Russia should not be allowed to corner the market on Central Asian gas, which already flows through Russian and Ukrainian pipelines to Europe.