Russia Profile
December 31, 2008
A Gloomy Forecast for 2009
The Unending Gas Dispute is Just the Tip of an Iceberg of Tensions between Russia and Ukraine
By Dmitry Babich
Yet again, Russia and Ukraine are entering the New Year in a state of bitter conflict over the question of Russia’s gas supplies to Ukraine. Unfortunately, this is just the most immediate of a host of problems in bilateral relations which make the forecast for the next year rather gloomy. These problems include not only the intention of a part of the Ukrainian elite to push the country towards membership of NATO, bitterly opposed by Russia, but also the rivalry between the two systems of post-Soviet government embodied by the two countries.
On December 30, Viktor Zemlyansky, a spokesman for the Ukrainian energy holding Naftogaz, announced that his company paid $1.5 billion to the Russian natural gas monopoly Gazprom, thus removing the obstacles to settling the dispute. A day earlier, Gazprom announced that it was making technical preparations for cutting the gas supplies to Ukraine, and this was just the last link in a long chain of negative news.
On December 24, Gazprom spokesman Sergei Kupriyanov announced that the Ukrainian gas monopoly Naftogaz had breached its contract with Gazprom by failing to transfer to Gazprom the payments for November and December gas deliveries.
‘The debt for November amounts to $805.8 million and for December $862.3 million,” Kupriyanov said. “During the meeting between Gazprom’s CEO Alexei Miller and his colleague from Naftogaz Oleg Dubina the Ukrainian side made it absolutely clear that it was not going to make these payments until the end of the year.”
On Wednesday, in an interview to the heads of Russia’s three main television channels, Russian President Dmitry Medvedev made it very clear that he was not going to back off on the issue. “They have to pay the full amount unless they want their economy to face the sanctions and demands from the Russian Federation,” Medvedev said. “This situation cannot be allowed to continue. Let them pay all the money.” Medvedev made it clear that although Russia had no wish to cut off gas supplies to Ukraine, it is prepared to go to great lengths to get its money from Kiev.
“Although Naftogaz makes good profits on the Ukrainian market, Ukraine as a state is unable to pay the same amounts of money for Russian gas which Western Europe does,” said Lidia Kosikova, the former head of the Ukrainian sector at the Institute of Economy, Russian Academy of Sciences. “So, it is only natural for Russia to make the price discounts for Ukraine dependent on its attitude to Russia’s integration initiatives.”
The problem is that the Ukrainian leadership, at least since the “orange revolution” of 2004-2005, has been making every effort to irritate and alienate Russia, despite Russia’s efforts to buy Ukrainian loyalty with economic benefits. The year 2008 was marked by several important steps in that direction. In April, Ukrainian President Viktor Yushchenko and Prime Minister Yulia Tymoshenko made an effort to put Ukraine on NATO’s Membership Action Plan (MAP). The move, supported by the United States, was blocked only thanks to opposition from several key West European states, including Germany and France, which nevertheless assured Ukraine that it would get NATO membership some day in the future. In August, Yushchenko rushed to see and support his Georgian counterpart Mikheil Saakashvili two days after the latter ordered the attack against Tskhinvali, the capital of the separatist enclave of South Ossetia, which only the intervention of the Russian army saved from defeat. In November, Yushchenko tried to make as much publicity as possible from the anniversary of the Holodomor, the Stalin-organized famine in Ukraine in 1932-1933. Despite the fact that the anniversary was not a well-rounded figure (75 years) Yushchenko suggested convening a summit of world leaders to commemorate it, sending an invitation, among others, to Russian president Medvedev.
Medvedev declined the invitation, citing his disagreement with the way the events of 1932-1933 are interpreted in Ukraine, where the famine is presented as “genocide” specifically aimed against Ukrainians. The actions of the Bolshevist regime of the time, which destroyed independent peasantry “as a class,” not only in Ukraine but also in Russia and Kazakhstan, are interpreted by official Ukrainian media as one more manifestation of Russian “imperialism,” with Moscow at its heart. In Russia, the so called collectivization of 1929-1933 is usually interpreted by historians as “sociocide” - a murderous plot aimed against a whole social group, but not against a specific ethnicity.
In this situation, the gas row becomes just the last drop of water in an already full cup of mutual accusations and bitterness. The situation is exacerbated by the economic crisis in Ukraine, which has taken a much more severe character there than in Russia due to the small amount of Ukraine’s stabilization fund ($37 million against Russia’s pre-crisis $1.3 billion), the structure of the Ukrainian economy (metallurgy and the coal industry, both crucial to Ukraine, have been hit by the crisis worldwide) and a conflict within Ukraine’s elite between president Yushchenko and prime minister Tymoshenko.
Good relations with Russia could help alleviate the pain of the crisis, but few experts expect an improvement under the current Ukrainian leadership. In the difficult times of the 1990s, Russia already provided economic assistance to Ukraine, but this policy did not pay off.
“The full amount of Russia’s annual economic assistance to Ukraine in the period between 1992 and 2005 fluctuated between $3 billion and $5 billion per year,” Kosikova said. “This economic aid included writing off Ukrainian gas debts, providing nuclear fuel for Ukrainian atomic power stations at discount prices, etc. The Russian leadership feels betrayed by Ukraine and will not give it a free ride any more.”
Another reason for hostility was better noticed from the Ukrainian side.
“For many countries of the former Soviet Union, Ukraine became a model of a new system of government, alternative to the Russian one,” Valery Chaly, the head of international programs at the Kiev-based Razumkov Research Center, said in an interview to Nezavisimaya Gazeta. “The ability of this system to outperform the Russian one will have a direct impact on the political situation in Russia and other post-Soviet countries. So, Russia’s leaders are not interested in Ukraine’s economic recovery and will not support Ukraine against their own interests.”
A comment from the Vesti Plus program on Russia’s state-owned RTR television proves the point.
“People who want a triumph of democracy in Russia, should buy a train ticket to Kiev and see what life is like there,” the program’s anchor said in a clear reference to the difference between the two countries’ political systems.