It’s no secret that Ukraine isn’t happy with its current relationship with Russia. Kiev has grown adept at playing Moscow against Brussels, but at the heart of the matter is dissatisfaction over natural gas contracts: Ukraine pays more than the average European customer for Russian gas, and it is locked in to long-term, take-or-pay contracts for the privilege. Ukraine has been actively working to develop its domestic energy reserves—much of which lie in shale formations—in order to reduce its dependence on Gazprom, and Russia is not pleased. Reuters reports:
Using language that harked back to earlier spats in which Moscow cut off gas to Ukraine, hitting onward deliveries to Europe, [Russian Prime Minister Dmitry Medvedev] told Gazprom CEO Alexei Miller Kiev had not taken the payments seriously enough in recent talks.“The (problems) exist and they are absolutely critical,” he said at a government meeting.Miller said Ukraine had been given until Oct. 1 to pay for natural gas deliveries in August, but no payment had yet been received.
Moscow’s trump card in this dispute is, of course, to shut off the gas, something it proved willing to do in 2006 and then again in 2009. But Russia has more to lose in such a shutdown than it did in those years. It’s intent on ramping up gas exports to Europe, but the majority of that gas travels through Ukraine. Disrupting that supply would force its European customers to get even more serious about diversifying their energy options, thus pushing them further into the arms of LNG exporters like Qatar.More importantly, Ukraine is in a much stronger position now than it was in 2006 or 2009. It’s poised to sign a raft of trade and diplomatic agreements with the EU next month, and claims to have learned from the past by storing enough gas underground to last it through the winter, should Gazprom get feisty.Russia’s power is waning, and its favorite bit of leverage in Europe—energy—is looking less and less relevant.[Putin photo courtesy of Getty Images]