The Ukraine-Russia Energy Crisis

January 8, 2009 Topic: Economics Region: RussiaEurasia Tags: Energy Policy

The Ukraine-Russia Energy Crisis

Everybody shares the blame for the recent conflict. Neither Ukraine, Russia, the EU or even the United States come out with their hands clean or their relationships intact.


Factories in southern Europe cut their production and ordinary cities began to lose their heat. After the cutoff of Russian gas supplies through Ukraine, German Chancellor Angela Merkel is quite right to state "searching for the causes is not the first priority. The first priority is for gas to reach Bulgaria, Serbia and Bosnia again." But she is also right to observe that once the immediate crisis is over, hopefully via the deployment of European Union monitors at Ukrainian transit stations, it will be essential to think seriously about "consequences for European policy."

Unfortunately, so far there has been little analysis about the underlying causes of the Russian/Ukrainian gas-price dispute, which clearly goes beyond commerce alone. All parties-including not only Russia and Ukraine, but also the EU and the United States-share blame for a situation that has deteriorated into an international emergency.


The divided and dysfunctional government in Kiev acted in a truly delusional fashion, assuming that it could pursue a hostile policy toward Russia (or at a minimum a policy they knew Russia considered hostile), and still expect to get Russian gas at a heavily subsidized rate. During the first gas conflict with Ukraine in 2006, the Kremlin made abundantly clear that it was not prepared to accept any such arrangement. Yet President Viktor Yushchenko, despite some hesitation on the part of Prime Minister Yulia Tymoshenko, not only insisted on bringing Ukraine into NATO as soon as possible, but sided fully with Georgia during its August war with Russia. Moreover, as a commission of the Ukrainian parliament, the Rada, has established, Yushchenko repeatedly authorized secret Ukrainian military assistance to the Georgian army. The Russian government claims that most Russian combat aircraft destroyed in the conflict were hit by Ukrainian-made anti-aircraft missiles, crewed by Ukrainian advisers. The Ukrainian government is entitled to determine its own foreign policy, but would be reckless to assume that Russia would provide multibillion dollar subsidies to an adversary. . . .


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