Posted on 01/12/2006 5:54:04 AM PST by Willie Green
For education and discussion only. Not for commercial use.
When Russia cut the flow of natural gas to Ukraine, it was more than just a pricing dispute. It was the use of a dominant economic position to make a political statement. In Paris, Le Monde called Moscow's action, "The first declaration of war in the 21st century." France is one of the many European countries that use natural gas shipped from Russia through pipelines that cut across Ukraine. Europe imports about a quarter of its natural gas from Russia, a development which President Ronald Reagan tried to block during the Cold War. Though the Russian cutoff was aimed at denying gas to Ukraine, Kiev replaced some of the lost Russian shipments by taking out of the pipeline gas meant for destinations further west, a move that spread the effects of Russia's exercise of power throughout Europe.
Under an agreement that was to run until 2009, Ukraine was paying a subsidized price for gas at $50 per 1,000 cubic meters. This arrangement was made by the Russians with the former, pro-Moscow regime of Leonid Kuchma in an attempt to keep him in office. When his designated successor Viktor Yanukovych was defeated by pro-Western Viktor Yushchenko in the "Orange Revolution" election last year, Moscow no longer considered Ukraine to be entitled to favorable treatment. Russia's position in the gas market is strong enough to practice price discrimination in regard to the former provinces of the Soviet Union, which disintegrated in1991. The Baltic states of Latvia, Estonia and Lithuania, which have joined the European Union, pay $120 to $125. Belarus, a firm Kremlin ally, still pays only $47 per 1,000 cubic meters.
Moscow, through its state-owned oil company Gazprom, demanded Ukraine pay $220-230 per 1,000 cubic meters, a price that would cripple Ukraine's heavy industries at the core of its economy. During the crisis, Ukraine's chemical and metallurgical industries slowed production to reduce demand by 15 to 20 percent, according to a statement released by the Kiev government. The January 4 agreement which ended the dispute (perhaps only temporarily) sets prices at around $100 and blocks Ukraine from importing gas from Turkmenistan, whose exports also flow through the Russian-Ukrainian pipeline. The agreement "is Russia's great victory," declared Ruslan Grinberg, director of the Institute of Economics at the Russian Academy of Sciences.
Igor Torbakov, a Ukrainian scholar writing for the Washington-based Jamestown Foundation sees the crisis as a sign of Moscow's new determination to halt the further drift of former Soviet provinces into a Western alignment (either European or American). He argues, "The Kremlin has made perfectly clear to its neighbors that those who choose a pro-Russian orientation will retain economic privileges, including subsidized energy supplies. By the same token, the countries that seek to integrate into Western structures should be prepared to pay 'world-level prices' for imported Russian oil and gas and bear the potentially dire consequences of their geopolitical choice."
Russian President Vladimir Putin was a colonel in the Soviet KGB secret police. Last year he called the collapse of the Soviet Union "the greatest geopolitical catastrophe of the century." This is not just about the failure of communism. The Ukraine had been part of the Russian Empire for centuries, and its Crimea region has a majority Russian population. Putin is not alone in Moscow or the rest of the country in wanting to rebuild Russia as a great power. Putin has given strong support to the dictatorship in Uzbekistan, resulting in that regime's decision to order the U.S. to evacuate an airbase that had been supporting operations in Afghanistan. Russia has troops in Transdniester, a separatist region of Moldova. It is reestablishing its Cold War ties with Syria with weapon sales, and is supplying nuclear technology to the anti-Western regime in Iran.
The use of natural gas as a political weapon is only one modern example of a tactic used by Russia when it was initially building its empire. After Russian defeated Sweden in the Northern War, it gained the area of Livonia (today's Baltic states), which had been Sweden's breadbasket. In the Treaty of Nystad (1721), Russia allowed Sweden to buy each year 50,000 rubles worth of grain from Livonia, but retained the right to cut off that supply for "important reasons" to be determined by Russia. When, in response to Russia's armed intervention in Poland to place its favorite on the throne, Sweden and Denmark formed an alliance with the support of France, Russia cut off the grain shipments.
Harvard historian John P. LeDonne has described Russia's policy as "destabilizing the Swedish core area for the purpose of transforming it into a Russian protectorate." [The Russian Empire and the World 1700-1914, Oxford University Press]. And to keep Sweden weak, Russia intervened in its domestic politics, giving financial aid to political factions which opposed the formation of a strong central government and industrial development. Now that Moscow is trying to rebuild its empire, it should not be surprising that Putin would return to the same tactics that great powers have used in the past.
Pipelines play a role elsewhere in Kremlin strategy. Russia has joined with China in creating the Shanghai Cooperative Organization, which also includes Kazakhstan, Kyrgystan, Tajikistan and Uzbekistan (all former Soviet provinces). Though the SCO was created to fight Islamic terrorism in Central Asia, its other prime objective is to keep American influence out of this energy-rich region. In August, 2005, Russia and China held joint military exercises on China's Yellow Sea coast, which faces the Korean peninsula and Japan, under the auspices of the SOC. The exercises involved troops and naval forces from both countries and strategic bombers from Russia. The operations that had little to do with counter-terrorism, but were widely believed to be directed at countering the U.S.-Japanese alliance.
On December 15, the state-owned China National Petroleum Corp. inaugurated an oil pipeline running from Kazakhstan to northwest China. The pipeline will undercut the geopolitical significance of the Washington-backed Baku-Tbilisi-Ceyhan oil pipeline, which opened last summer. Half the oil being carried to China will come from Russia, until Kazakhstan's output is expanded. Estimates are that Kazakhstan has 35 billion barrels of discovered oil reserves, twice the amount in the North Sea, and may have double that amount in additional, undiscovered reserves. In October, Beijing completed a $4.18 billion takeover of PetroKazakhstan Inc., beating out ExxonMobil in a deal shaped as much by geopolitical considerations as by money.
In the 1990s, it was assumed that the end of the Cold War had brought a "new world order" and, perhaps, even an "end to history" in the sense of no more great power rivalries. The international scene would, instead, be dominated by the economic theories of harmonious trade propagated by the liberal thinkers of the 19th century. That naive view was made into hash time and again in the 19th and 20th centuries, and, as LeMonde pointed out, it is now the 21st century and conflict still abounds.
Unfortunately, despite being engaged in wars in Iraq and Afghanistan, and in struggles elsewhere from terrorism and drug wars to diplomatic wrangling and trade wars, too many officials in Washington still labor under the delusions of the "post-Cold War" euphoria. America needs a revival of strategic thinking, starting with a sober evaluation of the real role of economics in international relations and national strength. Government leaders need to act to protect the country's wealth and capabilities from the machinations of rivals.
America's mounting deficits in the energy, manufacturing, and financial sectors are of the kind associated throughout history with a society on the brink of decline, not one that is positioning itself for future achievements. Putin is not the only president who needs to think about rebuilding the foundations of his nation's greatness. One of the somber lessons of life and history is that it takes much longer to climb to the top than it does to fall from the summit.
ping
*** In Paris, Le Monde called Moscow's action, "The first declaration of war in the 21st century."***
Errr, Iraq?
Bump
Errr, Iraq?
============================================
Errr, September 11, 2001?
Good point. I guess I was thinking in terms of *legitimate* declarations. But you're right, that was a declaration nonetheless.
Whichever you choose (Trade Center or Iraq), you are correct - the French are wrong (as always).
This article reinforces the notion that relying on Russia for energy is dangerous.
He argues, "The Kremlin has made perfectly clear to its neighbors that those who choose a pro-Russian orientation will retain economic privileges, including subsidized energy supplies. By the same token, the countries that seek to integrate into Western structures should be prepared to pay 'world-level prices' for imported Russian oil and gas and bear the potentially dire consequences of their geopolitical choice." ===
If you ar emy friend then I support you but if not then no.
What is wrong with it?
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