Gerd, are you listening?
My predecessor has been uncharacteristically silent during the current Russia-Ukraine dispute. Having second thoughts about listening to Vladimir's siren song, I wonder? Well, finally the international press has noticed. I've had the following article transcribed from the Commentary page of today's Financial Times in the hopes that Gerd will read it and listen to what they're saying. The American slipped away before Vladimir could snare him. Gerd wasn't so quick, unfortunately, but perhaps it's still not too late for him to make a dignified exit. We were political adversaries, it's true, but I still would hate to see him humiliated and ending his career as Vladimir's lapdog.
From the Financial Times:
The Kremlin tightens the energy screw
Published: January 3 2006 02:00 | Last updated: January 3 2006 02:00
Russia has crossed a dangerous line in cutting gas supplies to Ukraine. While Moscow has legitimate grounds for complaint in its dispute with Kiev, its actions are irresponsible. The interruption of Ukraine's shipments will damage Russia's efforts to establish itself as a trustworthy energy supplier. It will also cast a shadow over President Vladimir Putin's attempts to increase Russia's global influence. Moscow's year as president of the Group of Eight for 2006 could not have had a more difficult start.
Moscow is within its rights to end the preferential deals under which former Soviet republics buy gas. Given the high global energy prices, price increases are commercially justified. They are also desirable in economic and environmental terms as they could push the region's notoriously inefficient energy users to cut waste.
But the Kremlin's motives are largely political. Mr Putin is taking revenge on Ukraine for the triumph of, Viktor Yushchenko, its west-oriented president, in the Orange revolution. Russia is angry at its loss of prestige, irritated at Kiev's bids to join the European Union and Nato, and fearful of the precedent set by a successful democratic revolt.
Gazprom, the Russian gas giant, is raising gas prices across the former Soviet Union. Georgia, Armenia and Azerbaijan have seen prices rise from $60 per 1,000 cubic metres to about $110. The Baltic states have been hit by increases from $80-$95 to about $120. These countries may look enviously at Belarus which pays $50 and has escaped a price hike altogether - in a political favour from Russia to the dictatorial president, Aleksander Lukashenko. But with Gazprom supplying western Europe at $230 per 1,000 cubic metres, all these countries still enjoy a big discount.
Ukraine is in a different league, with Russia seeking an increase from $50 to $230 - that is, from the cheapest export rate to the highest. Singling out one customer like this flies in the face of commercial logic. This is Russia brutally flexing its political muscle.
But if Moscow hopes to cow Kiev into submission it may be disappointed. Crucial parliamentary elections are due soon: the dispute will probably benefit Mr Yushchenko's supporters and almost certainly damage Russia-oriented parties. The crisis will also accelerate Ukraine's efforts to cut its dependence on Russian gas by securing alternative supplies. The same will be true in the Baltic states, central and western Europe.
Russia says it is not reducing supplies to the EU, only cutting Ukrainian gas that flows down the same pipeline. It accuses Ukraine of "stealing" gas intended for other customers. Ukraine claims it is only taking payment in kind for the gas shipped to the west, in line with existing agreements.
These tortuous arguments show how closely linked are the interests of the producer and the shipper. The only answer is a rapid settlement, with the increases proposed by Russia spread over time.
The EU is failing to respond with sufficienct urgency. So reluctant are officials to break their holidays that the first EU meeting on the crisis is to be held only tomorrow. With Hungary's gas imports down by 40 per cent and Slovakia's by 30 per cent, this shows a shameful lack of EU solidarity.
The union needs more integrated energy policies. The best way to deal with Russia in the energy market is by presenting a united front - or at least a co-ordinated bargaining position. Such a joint stance would not directly protect Ukraine. But it would make it more difficult for Russia to apply pressure to its customers.
As a first step, Gerhard Schröder, the former German chancellor, should reconsider his decision to work for Gazprom as chairman of the planned Baltic Sea gas pipeline. He should not lend his name to such a blatant instrument of Russia's political power.
Mr Putin values Russia's presidency of the Group of Eight for the prestige it will bring Russia as chair of the global elite's top club. He also wants to use Moscow's presidency to address world energy policies. The EU, the US and Japan must tell Mr Putin that if he wants to keep his place among the world's leaders he must start behaving like one.