Wednesday, January 28, 2009

Sunset of Russian Influence in Ukraine?

Tuesday's Financial Times included a very short news item noting that the Russian government has decided to build a new base for its Black Sea fleet in the Abkhazian port of . 
It is difficult to know what to make of such announcements.  Eight years is far enough away that anything could happen.  Still, a timetable of eight years to build a huge military complex in ... certainly seems reasonable to suggest that Russia is seriously considering the prospect that it will be easier to evacuate Sevastopol than negotiate with Ukraine to continue using the Crimean seaport as the base for the Black Sea fleet after 2017.  

Undoubtedly, the announcement will spur anxiety in Crimea, where many jobs are dependent on the Russian base, and where nostalgia for the Soviet times is strongest.  That may indeed be what Russia wants, having already stirred up the waters by offering to grant Russian citizenship to Crimeans and create anxiety in Kyiv and Lviv, as well as among the professional worriers about resurgent Russia.  Yet, if this announcement is serious and building begins in ... then we will have to greet this as the Putin circle's first timid and grudging step towards recognizing the reality that they are gradually losing the ability to influence Ukrainian affairs, and further grounds to be skeptical of those who seem to that Russia under Putin is an inexorable force at least within the boundaries of the former Soviet Union.  Furthermore, we may want to consider if it is a coincidence that the announcement was made a week after the new Naftogaz-Gazprom agreement ended Ukraine's dependence on subsidized gas and Russia's good will. 

Still, the thought that Russia is even considering the possibility that   into into If work has begun on site, it only involves the most preliminary tasks, though that is unlikely at this time of year.  So time will only tell how serious this talk is.  Right now it is just as plausible that this is another game of cat and mouse with Georgia.  Yet, if this is more than bluster, Work surely hasn't yet begun on site, and time will only tell if it does.   As such it may simply be part of 

Saturday, January 24, 2009

Remembering the Revolutions of 1989

It seems hard to believe, but we are approaching 20 years since the end of Communism in East Central Europe.   Here is a link to a flickr slideshow primarily of Berlin, but with a few contributions from Poland and Hungary that may refresh memories and give those who don't remember it some sense of what went down.  (Hat-tip Daniel Antal)

Monday, January 19, 2009

The Russian-Ukrainian Gas Settlement

And now the dispute is over, as we knew it would be.  At first glance the deal looks pretty good to me, although some I've not seen reference to some important details, most notably what will happen to transit fees in 2010, after the 20% reduction for keeping the transit fees at 2008 levels concludes.

Key points:
1) Rosukrenergo is out of the picture. In short, transparency, which is a good thing, and if Kyiv Post's information is correct that Yushchenko got backing from the Rosukrenergo oligarchs, then another sign that Yushchenko is on his way to oblivion 
2) Gazprom conceded flexibility regarding the market rate rather than trying to lock in today's current price around 450 per 1000 cubic meters for the entire year, as it had appeared to be angling to for even though all expectations are that gas prices are set to drop markedly to about the $250 per 1000 cubic meters that Tymoshenko had been talking about earlier.
3) The deal lasts for ten years, a time frame that is likely to help reassure customers in the rest of Europe that Russia and Ukraine can be reliable.

Winners and Losers:

I think Tymoshenko is the big winner here, and her reputation as a reformer who has used her previous experience getting rich in the gas trade to use for the good of the country.  As mentioned above she appears to have managed to weaken Yushchenko further, while showing it is possible to deal with Russia realistically without following Moscow's line as Yanukovych ultimately did.  And in the sphere of presidential politics nothing succeeds like success, so there is little incentive for those like the Litvin bloc and the growing renegades from Our Ukraine (hat-tip Taras Kuzio) to look around for someone other than Tymoshenko to lead the opposition do battle against Yanukovych and the Party of Regions.  

True the new gas prices will be proportionately quite high and in the current state of the Ukrainian economy will likely create some real stress.  That said, since decline for steel is already declining, the effects on steel producers will not be quite as great as they might have been. The situation might also finally create conditions that would lead Akhmatov and other big in steel production to develop more efficient smelters and such.  

The biggest loser here though is Gazprom and Putin.  Only the willfully blind (i.e. Gerhard Schroeder) can now hide from the notion that Gazprom is being used as a vehicle for Russian foreign policy and is not a normal company.  But perhaps more important is the fact that Tymoshenko and Naftogaz successfully avoided falling into the traps Gazprom hoped they would fall into.  

In my earlier entry, I expressed some doubts about the wisdom of Tymoshenko denying that any gas had been "stolen". Not knowing as much about gas and the gas pipelines as I wish, I remain a bit skeptical about that.  Indeed the decision not to let the so-called "test-run" of gas run through an alternative route using because it could not be done without cutting off Ukrainian supplies seems to be an admission that there are inconsistencies in many pipelines, if not the druzhba pipeline itself.  Yet, in so doing Naftogaz preserved Ukraine's and Tymoshenko's reputation, and further showed to the world the extent to which Russia was prepared to do anything to push the blame for the stoppage onto Ukraine, when the decisionto cut Europe off had come from Moscow.  

To be sure, Putin, Gazprom, Tymoshenko, and even Yanukovych, if not Yushchenko will all live to fight again, so the dispute will not radically changed the playing field in the short term.  The question now is whether the new transparency in the Ukrainian gas business will provide an impetus for similar trends that will enhance the rule of law within Ukraine.  If that happens, it could help se the stage for a new Russian revolution that refocuses on democracy and the rule of law.

Friday, January 9, 2009

Gas Dispute Solution 0.5

The agreement to have European representatives monitor the flow of gas through Ukraine seems a step in the right direction.  If nothing else it sets up a means to create greater transparency in the gas trade which is the key to weakening the dynamics that allow this crisis to recur.  Although in as much these representatives will only be present as long as the negotiations over gas transfer fees Ukraine will receive from Gasprom and the price charged Ukraine for its gas, so if Gasprom succeeds in keeping RosUkrEnergo alive that transparency will disappear quickly. 

Still, even if the European delegation is only temporary it could at last help pin down some of the holes in the network that local officials have carved out to benefit themselves and their local business long ago during the corruption of the Brezhnev era.  My own small insight into that problem comes from my first apartment in Lviv, which was heated by gas, but had no meter to measure gas usage.   Thus, while I think Yushchenko and Tymoshenko are being sincere when they say that Ukraine is not stealing gas, at least systematically, I suspect they are likely to be embarrassed by issuing such blanket denials.  Of course, I think it is just as likely that the folks at Gasprom are also going to have to finally acknowledge the holes in the gas pipelines within Russia.

Wednesday, January 7, 2009

The Russian-Ukrainian Gas Dispute Again

I had not initially thought I would make a post about the gas dispute.  It has become a predictable event and the outcome that a deal will be reached probably sooner than the apparent intransigence of both parties suggests.  Moreover, it has become something of a truism that this dispute is an effort by Russia and Putin to use gas as a weapon to keep Ukraine as much a part of the "near abroad" as possible.  It is heartening therefore to see an op-ed article by Jerome Guillet and John Evans published in today's Financial Times.  Guillet, who on the internet goes by the name Jerome a Paris, is probably the most knowledgeable expert on Gasprom -- his comments posted at Daily Kos during the 2005 crisis were eyeopening -- and his point in that piece is that the real issue is not so Russian and Ukrainian relations as it is the continued influence of oligarchs in Russia and Ukraine.  That point gets to the ugly truth about post-Soviet states that is so easily obscured when we people try to dig up old geopolitical models some dating back to the nineteenth century and the "Great Game."  Indeed every time people write about Putin creating a new energy based superpower that will allow the Kremlin to wield incredible power over its neighbors, they are helping Putin retain his popularity.  A more democratic Russia depends on Russians understanding that the ability to be a player and stability are not one and the same thing.  Indeed, the current economic crisis is closer to revealing the extent that Putin's Russia is close to being a giant Potemkin village. 

By the same token, treating Ukraine as a fragile state that will soon be brought to its knees by Putin's maneuvering  distracts from the truth that however lacking it may be compared to its western neighbors, let alone western democracies, Ukraine continues to be better positioned to become more democratic and more stable than Russia in the mid-term.  But it can only do that if the Ukrainian state's ability to enforce and insist on the rule of law in the economic sphere increases.  In this light, the great question is what happens to RosUkrEnergo.  If as Tymoshenko has called for RosUkrEnergo's role as transfer agent is curbed and the gas transfer becomes more transparent.  If it continues to become the conduit then Ukraine will be held back, which will of course help Putin, because it will help keep Russians from asking the questions they might ask if they see a more transparent economic and political system emerge in Ukraine.

In short this dispute matters, but if European states would look beyond the immediate interests of needing energy, they will see that a deal at any price that allows RosUkrEnergo to continue to act as an intermediary will only insure that further crises will occur down the line.  If they come out on the side of transparency, it will be a step towards providing greater energy security for all of Europe than any additional pipeline routes.