Ukraine Is Europe's Problem, Too

Russia wants Brussels to pay up and accept the consequences of having an unstable transit route for its gas.

When Russia turned off the gas taps in 2006 to punish Ukraine for not paying up, the image of a former Soviet heavyweight punishing a pro-Western neighbor was hard to shake off. But when it did so once again, in January, Ukraine was no longer such a good guy. Here was a country getting tidy gas subsidies from Russia, its supposedly unscrupulous neighbor, and refusing to cough up $2.4 billion, at a time when other customers were paying market prices and the costs of production had gone up.

The two countries eventually reached
a new pricing agreement, but clearly

Ukraine’s status as Europe’s primary
transit route for Russian gas is still a

big risk. That’s why Russian president
Dmitri Medvedev asked the European

Union on Friday to shoulder some of the
cost of keeping Ukraine on its feet

and paying its gas bill to Gazprom, especially

with Ukraine’s battered economy and
political fractures pointing to a difficult

winter ahead.

“Russia is saying it’s no longer going to take reputation damage for something that–after the January dispute–is seen as more of a transit risk,” said Andrew Neff, an analyst with IHS Global Insight. He said that Europe’s approach so far had been to concentrate on the safety and capacity of Ukraine’s pipeline network, which was not exactly an adequate solution given the effect of the financial crisis on the region. Energy prices have slumped, while Ukraine’s economy is expected to shrink by 8% this year.

“We have doubts about Ukraine’s ability to pay,” Medvedev told reporters at a news conference. He said Russia was prepared to team up with Europe to bolster their transit country, but he refused to promise an end to the disruption dramas that have kept Europe worried over the security of its gas supplies.

Forbes