Russia, Ukraine and natural gas, once more…

Once again Russia and the Ukraine are at it over the issue of the latter’s unpaid gas bills. Out of the 390 cubic metres of Russian natural gas that go through Ukrainian territory each day, 300 are bound to be transited to other European countries. While Gazprom, Russia’s natural gas monopoly, has announced it has limited its deliveries to these 300, final destinations, among them Bulgaria and Romania, have been experiencing a drop in deliveries, something which has raised suspicions that Ukraine is siphoning off gas meant for transit rather than its own consumption. Ukraine on the other hand is claiming this is happening for technical reasons. Since siphoning off is what is generally assumed to have happened the last time we saw a similar row, it is difficult to make this claim and still expect people to believe you. Nervousness is about and the European Union’s Czech presidency has demanded the conflict be resolved quickly so as not to jeopardise deliveries and is also attempting to mediate.

This situation has several interesting features to it. First of all, this is not merely a show-off of Russian power (even though there is an element of it in there); there is no doubt that Ukraine has been receiving subsidised gas all this time and there has for several years been a genuine eagerness on the part of Russia to receive prices closer to the correct market value and this has not only affected Ukraine but also Belarus, which has had a far cosier relationship to its neighbour these past years, to no avail. Secondly, it is likely to have an effect on Ukraine’s relationship to the European Union. If, yet again, Ukraine is indeed siphoning off gas that is meant for EU countries, irritation is likely to rise. It might increase support for the new Russian pipeline running across the Baltic Sea, circumventing the most troublesome transit countries, and thus in the long run make Ukraine less able to rely on the EU to exert pressure on its main energy supplier. Russia could easily live with such an outcome. Ukraine on the other hand might have to enjoy a somewhat colder day after tomorrow. There is after all no coincidence that these conflicts have a tendency to erupt during winter time.

Medvedev, then what?

Now, when it seems pretty obvious that Dmitri Medvedev is on his way of becoming the next president of the Russian Federation, it would be interesting to think a little about what this will mean for Russia and, perhaps most importantly, its relationship with the West. An analysis of this would be important because this, if anything, seems to be what might change quite fast. Foreign policy is rather naturally an obvious part of the domain of the president and also where the present establishment is most likely to give him any opportunities to have a real impact. Going after domestic issues at first would undoubtedly make things feel a bit uncomfortable for many people within this group, something which of course could have repercussions for the new president. To make certain he would remain supported by the establishment, Medvedev expressed his desire for Putin to become prime minister after the election, this way reassuring these people he would not constitute a threat to them. Putin, to my knowledge, still has not accepted this offer in public and my hunch is that he will not for some time. He might even wait till after the election itself, just to keep people a little on their toes. All the same, this is a clear sign of Medvedev’s weak position. Will it ever grow stronger so that he will be able to govern on his own? I see no reason to doubt that; Putin did not pick someone simply because in this way he would be able to control him. Putin has been working with Medvedev for years and given him important portfolios to look after. He is obviously trusted. If Putin wanted to remain in power indefinitely he would have picked someone with a weaker position, such as present PM Zubkov. The office of the president is so powerful in itself that there is a good chance things will work out for Medvedev, so long as he does not try anything stupid before he has had the time to build for himself a proper power base, which is not solely dependent on his predecessor. Given Putin’s strong position at the moment, he will though have to remain as the guarantor of a smooth succession, as prime minister or something else.

With Putin in the background (or perhaps even in the foreground), it is very likely that the only part where Medvedev in the beginning will be able to exercise much influence will be on foreign policy. The sad truth is we do not know what this will mean. Medvedev has been exceptionally quiet on the issue, perhaps not too perplexing given the fact that he has always held positions of more domestic substance, such as head of the presidential administration and then first deputy prime minister. This, however, never stopped the person always thought to be his main contender for the presidential blessing, Sergei Ivanov, too first deputy prime minister. That Sergei Ivanov has been fairly active within foreign policy might perhaps not be too surprising, since he used to be minister for defence and as such far more involved in bilateral and multilateral issues than Medvedev, at least in public (Ivanov even once met with the King of Spain, somewhat obscure since he was then merely a member of the cabinet). There are analysts suggesting that Medvedev’s silence on the matter might have been because of disagreement with the path chosen. Even though he for a long time has been a member of Putin’s inner circle of co-workers and friends, there could be something to it. Let’s explore why. 

The most obvious reason is that Medvedev never served in any branch of the security services, in contrast to Ivanov who spent his career within first the KGB and then the heir of most of its part, the FSB. Medvedev, being the son of academics and himself briefly a law professor, does not perhaps have the instinctive mistrust of the West that has so poisoned many of the people in the Kremlin. This in combination with the election of an American president more keen on multilateralism and international co-operation might result in a much-needed improvement of Russian-American relations. If you compare him to Ivanov, the latter is by far more likely to make references to Nazi-Germany while talking on American hegemony.

Medvedev is also a liberal when it comes to economics, so he will probably put more emphasis on things such as trade. As president of Gazprom he is also likely to understand that Russian gas is not only a tool for exercising pressure on one’s customers, but that there is also a business perspective on all this. This will be important especially in dealings with the European Union. 

 All this is not to suggest that Russia’s stand on the main geopolitical issues of our time is likely to change. But with a new president in the Kremlin there might at least be some room to maneouvre. 

Russia and the West

This week we have been reading senior leadership quotes about foreign management and western spies. First it was President Putin, who in a speech in front of the Federation Council, the upper house of parliament, wanted Russian companies within the energy and raw material sector to rely less on foreign management. Later, the director of the Federal Security Service (FSB), Nikolai Patrushev, told the readers of weekly Argumenty i fakty that western intelligence operatives were actively trying to influence the outcome of the coming parliamentary and presidential elections by trying to influence protests and demonstrations. According to Patrushev, the goal of Western governments is to dismember the Russian Federation. Some analysts see this as nothing but electoral propaganda, but I disagree. It is more of a sincere belief that the world is still bi-polar and international politics a zero-sum game being expressed. This sort of opinions has been voiced regularly for quite some time and not only when the country is approaching elections. E.g., in 2004 after the awful terrorist act aimed at a school in the North Ossetian town of Beslan, President Putin went on the air to tell the Russian people that foreign powers that still considered Russia a threat, being a nuclear power, were aiding the terrorists to tear off a large piece of Russia.

While nobody is better at spotting a conspiracy than the Russians, regardless of whether there is one or not, it should be interesting to consider whether there is any proof to all this. No doubt were the Rose Revolution in Georgia and its orange counterpart in Ukraine supported, morally and financially, by Western powers. But on the other hand, there are strong indications that Russia assisted yesterday’s Ukrainian regime in poisoning then opposition presidential candidate Viktor Yuschenko. Now, if that is not meddling, I do not know what is. 

NATO enlargement has also given Russia a sense of becoming more and more surrounded by enemies and, thanks to growing self-esteem that comes from its increasing wealth, the fight to retain its influence of what used to be the Soviet Union has become more intense; hence the struggle to keep Georgia and the Ukraine out of NATO.

It is not difficult to see from where Russia gets its ideas of a Western conspiracy, but we should put one thing straight: no Western government would like to see Russia dismembered, with all the chaos that would stem from such a development. That very senior Russian government officials still claim this is seems to be because they see Western intrusions in what they consider to be Russia’s sphere of influence as a sign that Russia itself is up for grabs. Frankly, there seems to be confusion about where the boundaries of Russia really go. That neighbouring countries are invited to join NATO is not proof of any conspiracy against Russia, but rather of a desire among these countries to distance themselves from their past, when they were either members or satellite states of the Soviet Union. That they no longer feel a connection to Russia is basically Russia’s own fault, even though they are masters at failing to admit this. We should also look upon this in the light of Russia’s own actions in Moldova and Georgia, where so called Russian “peacekeepers” are in effect supporting the rulers of non-recognised states that have broken away from the central government of these countries. Now, if that is not dismembering, I do not know what is. 

Putin’s remarks, too, should be read in the light of this sense of conspiracy. Putin wrote his doctoral thesis on the use of natural resources as a strategic tool for governments (even though there are doubts about whether he actually wrote it himself) and he has proven ready to use this weapon on several occasions. With the continuing consolidation of energy suppliers within the hands of the government, there should come as no surprise that foreign (read: Western) management is not very appreciated.

Russia still does not trust the West. It will never do so as long as it continues to see the former Soviet Union as being present day Russia’s sphere of influence and as long as Western criticism of the troubling state of Russian democracy is seen as meddling within its internal affairs. And sensing this conspiracy, whether real or not, Russia will continue to carefully guard its most powerful tool of exercising influence. And no doubt will they continue using it. 

EU, Russia and the Gas

There is intensive debating regarding the European Union’s relationship to Russia within the energy sphere at the moment. It has been specially visible with regards to the North European Gas Pipeline (NEGP) that Gazprom, the Russian state gas monopoly, wants to put on the bottom of the Baltic Sea. In Sweden the discussion has been somewhat heated, because the pipeline would pass within the boundaries of Sweden’s economic zone. Many people obviously do not feel at ease with this, since they fear increased military activity on behalf of Russia in the region. Environmental issues have also been raised, even though this is most likely an attempt to simply hide the fact that what lies behind all of this remains the angst with which these people look at Russia. Putting a pipeline on the bottom of the sea without setting off any disposed of chemical weapons from World War II should not constitute a severe difficulty; after all it is not the first thing put there. Also, an increased military presence in the Baltic Sea might look threatening, but is not the most serious of scenarios in this case.

What should be, and to some extent is, of concern in this matter is the subject of energy security. The question is not whether the European Union will grow dependent on Russian gas. It already is. In 2005 the Russian share of EU gas imports was 50%. (Larsson, Robert. Sweden and the NEGP – A Pilot Study of the North European Gas Pipeline and Sweden’s Dependence on Russian Energy. FOI 2006) That is obviously a dependency too large to be ignored. At the same time, and this too is of vital importance for understanding why there even is an NEGP, the EU share of Russian gas exports amounts to 60% (Larsson, 2006).

The term energy security has a dual meaning in Russia- EU relations. In the EU it refers to the access of a stable flow of energy from a reliable provider. For Russia it means to be able to control its own flow of exports. These interpretations, as we shall see, are highly correlated and at the moment neither is fulfilled to an extent that would satisfy both parties. First of all, Russia prefers to negotiate on a bilateral basis in these questions, i.e. not with the EU as a whole, but with the recipient buyers, e.g. Germany, directly. So far, Germany, which is a huge consumer of Russian gas, has been fine with this. Russian gas exports today go through the Ukraine, Belarus and Poland. Not only are these countries able to charge transfer fees for having the pipelines run through their territories, they also receive their own imports through the same system. When arguments have arisen about the heavily subsidized gas tariffs that CIS countries, such as Ukraine and Belarus, pay for the gas they use themselves, Russia has not long ago on two separate occasions responded by turning off the tap. It is not the same as shutting down Germany, because gas still flows there, but there is a very noticeable effect there as well, as could be witnessed during the Ukraine/Russia gas crisis in 2005/06. When such an important customer like Germany is affected, it serves to tarnish the reputation of Russia as a supplier. Energy security is nowhere.

Therefore, Russia is building the NEGP, thus bypassing the troublesome countries, which, supposedly, will give both Russia and Germany (other countries too would benefit, of course) energy security. At least one would think. However, there are other factors involved that are cause for alarm. Firstly, it is about the old transit countries, since Russia would then be able to put pressure on them without jeopardising the relationship with bigger and more important customers. Also, it could punish these larger countries without having to involve the others should they wish so. Of course Russia claims it would never do the latter and while they do they like to point to the fact that the Soviet Union proved to be a reliable energy supplier for Western Europe throughout the cold war. The situation now is, however, somewhat different for this to have any bearing on what we are discussing here. First of all, energy exports were a vital source of foreign currency, which the Soviet Union was constantly lacking but which Russia could not care less about at the moment. Also, modern Russia has on several occasions proven that, if deemed necessary, it does not hesitate to use the energy weapon against countries that have in some way displeased it.

But would Russia really use these methods against the EU? Probably, if it wanted to. Russia is fairly good at creating wedges and Poland, heavily dependent on Russian gas, has continuously not only resisted Russian pressure but also offered one or two provocations of its own. Now one might comment that still Russia has not punished Poland using the energy weapon (it has, however, used other types of pressure such as import restrictions on Polish goods), which might make it tempting to believe that these dangers are exaggerated. Not necessarily, since Russia might have resisted out of a concern that such actions would hurt what it believes to be more important EU customers. With the NEGP it would not have to worry. The interesting part is how these big clients would react to a Russian threat against Poland (or why not one of the Baltic countries which too have strained relations with Russia) that does not affect them directly. Objecting might cause Russia to turn part of its anger towards these countries as well. That is the problem of being dependent on someone. Energy security for Russia, but not for the EU.

There is absolutely nothing wrong with building the NEGP. The pipeline itself does not constitute a major security issue. The problem lies within the lack of diversification when it comes to securing the energy needs of the EU. More domestic energy production combined with a larger share of energy imports from other countries than Russia could solve this problem. Building the NEGP would also serve the purpose of strengthening the ties between Russia and the EU. As stated earlier, half of EU imports of gas come from Russia, while 60 % of Russian gas exports go to the EU. It is not only Europe that is dependent on Russia. Russia today lacks the infrastructure to let the gas flow in the other direction; China would then be the most likely recipient. But even though Russia has hinted that it might reconsider the EU as its primary export market for gas in the future, it also sees China as its main competitor in many ways. China becoming richer and more powerful might not be stoppable, but it is unlikely that Russia will go out of its way to offer a helping hand in this respect. Russia wants to be an energy supplier to the EU, it just should not be an almighty one that does not need to consider the consequences of how it treats its customers. The European Union could avoid being solely dependent on an energy supplier that on numerous occasion has proven unreliable. That would mean energy security for everyone.