Putin launches the ‘Gas Wars’
The Ukrainian armed forces’ offensive in eastern Ukraine Kiev continues, but with considerable difficulty. Meanwhile, on the eve of a summit between USA, Russia, Ukraine and the EU – and just as NATO is has announced its own military buildup in Eastern Europe – pro-Russian Ukrainian insurgents have effectively halted the Ukrainian army. The insurgents are maintaining control of most of Donetsk. The situation is very similar in Sloviansk where official Ukrianian soldiers have been forced to surrender to pro-Russian insurgents. The message here is that the Ukrainian government army is in poor shape and its troops lost and insecure. Certainly, the fact that the largely young recruits are forced to confront fellow nationals is not contributing to raising military fervor. The operation, in fact, was launched largely instigated by the more right-wing and nationalist Maidan party (a member in the current coalition that replaced the Yanukovich government) under the guise of “anti-terrorism’. The operation has resulted in all but an admission of defeat, especially considering that Russia has 35-40,000 combat ready troops massed at the border. The Russian government will uphold its policy of defending Russians and Russian speakers in Ukraine; that was the same motivation that prompted the invasion of Georgia in 2008.
Ukrainian security has accused Moscow of fomenting the insurgents, claiming that some Russian soldiers wearing unmarked uniforms have taken part in the actions in Donetsk. But, what is more interesting is that several Ukrainian soldiers, officers, security staff have switched side in support of the pro-Russian insurgents. Meanwhile, the Party of Regions, ousted former President Viktor Yanukovich’s political group, has appealed for the Government to cease military operations in the East. Washington has apparently taken no notice of the very complex and far from ‘black and white’ situation that is developing, limiting its reaction to threatening more sanctions against Moscow. This is not wise, because Russia has economic weapons at its disposal.
Russia is ready to unleash the ‘gas war’, cutting off supplies to Europe and sending the bill to Washington over its clash with the new Ukrainian government. Vladimir Putin has officially asked the EU to compensate Ukraine’s USD$ 2.2 billion gas import debt with Russia. Putin has warned EU leaders that if Kiev does not will pay its debt – the payment deadline for which expired on 31 March – Gazprom will be forced to ask for advance payment for supplies (current and future ), and in the event of further violations of payment terms, it “will fully or partially suspend supplies”, cutting off the EU. Washington accused Moscow of using energy as a “tool of blackmail” in the dispute over Ukraine. The USA has promised to support Ukraine through emergency funds and technical assistance in the areas of energy security/sector reform; however, so far no such aid has arrived and the pressure on the EU is real. Putin has also deployed a carrot and stick plan to help in efforts to stabilize and reorganize the Ukrainian economy but only on “an equal footing” with the EU, namely committing the same sums of aid. Putin, in addition, has also used the crisis to shore up the price of gas. He warned that to ensure the uninterrupted transit of gas to Europe, 11.5 billion cubic meters of gas will be added to Ukrainian deposits at the new price of USD$ 485.5/thousand cubic meters against the USD$ 285 of the Yanukovich era. This means a payment of USD$ 5.5 billion in addition to the aforementioned USD$ 2.2 billion.
Putin’s ‘gas diplomacy’ give Russia strong clout over the EU and US at the April 17 talks in Geneva, even if NATO has demanded that the talks cannot have any effect unless Moscow withdraws its approximately 40,000 soldiers at the eastern border. Russia has denied such a deployment, saying the satellite images that allegedly demonstrate this presence, were taken in August of 2013 rather than between late March and early April. As expected, the U.S. military will boost its presence in Eastern Europe in response to the persisting tensions in Ukraine. Nevertheless, this sort of action will not be effective and most EU countries are very concerned about economic sanctions against Russia – they are not willing to take the hit on behalf of Ukraine. If sanctions cost nothing for the USA, they carry a big price for Europe risks. Indeed, for the United States sanctions even represent an opportunity, because in the future they could increase arms exports to Europe, and eventually launch a new market for American gas.
Putin is drawing much of his political and military advantage from the fact that Western Europe suffers from energy weakness and action. Europe’s position of weakness derives from the fact that gas only flows from east to west, rather than also from west to east. The result is that some countries rely 80 to 100 % on Russian supplies. The crisis has brought to light the importance of energy independence. This is a concept that China has learned well; it has refused to switch to from coal to imported gas, preferring the domestic production of coal, despite the huge levels of pollution that it produces. Yet the images of masked Beijing residents masked making their way through the smog are evidence of how crucial decisions relating to security of gas supply are. If the EU thinks it can get away by snubbing Mosco, then it must quickly adopt a shale gas policy while also securing new supplies and building new pipelines to alternative production sources – perhaps North Africa? Otherwise, it will have to play Putin’s game.