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.