Russia, Ukraine and Europe's big chill: It is that time of year in Europe, when a serious chill sets in, Russia and Ukraine bicker, and a lot of people freeze to death. No one has attributed any of Europe's fatalities -- 139 reported at the time of this writing -- to the routine winter row between the former Soviet neighbors. But customers such as Italy (pictured above, St. Peter's Basilica at the Vatican), Hungary and Poland say their imports from Russia -- which supplies 100 percent of the gas consumed by some European nations, and a quarter of the continent's demand as a whole -- are down considerably during Europe's worst cold snap in some six years. Russia is blaming Ukraine, reports Reuters. Gazprom deputy CEO Alexander Medvedev says that Russia has actually stepped up gas exports to Europe, but that Ukraine is siphoning off more than its fair share. Ukraine replies that it is meeting its contractual obligations. Thus, neither country answers the question -- are they or are they not supplying the gas that Europe requires to stave off the cold? The backdrop is mostly that Russia simply cannot handle all the demand in such extreme temperatures. But another dimension is the continuing contractual warfare between Russia and Ukraine -- Ukraine wants to reduce the volume of gas it's contractually required to buy from Gazprom, which it says charges too much when compared to the spot market. Other European countries also gripe about Russian gouging, and Gazprom has responded by cutting gas prices for some of them (not Ukraine).
Edward Chow, an analyst at the Center for Strategic and
International Studies, suggests that much of the problem would be resolved
if Ukraine's corruption was reduced, and it pumped more of its own natural gas.
As it is, the bickering is directly responsible for a tense pipeline rivalry
between the West and Russia -- Russia is building new gas export pipelines in
order to bypass Ukraine, Poland and other unfriendly neighbors, and the West is
trying to build and fill up its own new pipeline from the Caspian Sea to serve
Europe. One suspects that Russia will again be the loser in this game of
tit-for-tat. Scenes such as Hungarian
villagers "scavenging for coal with their bare hands," as Reuters' Marton Dunai reports, will make
Russia look heartless.
Go to the jump for more of the Wrap
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Russian leader Vladimir Putin urges an end to absurdist doubt regarding his political longevity, and a focus on reality -- such as the triumphant energy deals with which he closed out 2011. Putin is referring to a surprising, double-flanking maneuver in Turkey and Ukraine that gives Russia the apparent advantage in the late stages of a contest for energy market -- and, some fear, geopolitical -- domination in Europe. But Putin's tenor also suggests a decided shift to the past in Russia's relationship with the world -- the "reset" of relations with the U.S. is over, writes the Financial Times' Charles Clover. Putin -- whose administration last week issued a formal report accusing the U.S. of "mass and flagrant abuses of human rights"
-- is clearly prepared for the type of fisticuffs last seen during the depths of the George W. Bush Administration.
Can one write off this clutch of anti-Western activity to domestic politics -- Putin singing a tune that he thinks plays well with Russian voters ahead of the March 4 election, in which he is seeking a return to the Kremlin for a third term? It seems more complicated than that -- Putin is playing to the gallery, but events outside Russia also are motivating him to behave at turns opportunistically; other times, they are causing him to lash out apprehensively.
Putin's energy gambit is an example of him acting on the opportunistic side, specifically in the realm where Russian politics frequently find animation -- in the construction, or blockage, of energy pipelines. In the current case, Putin has managed to seriously out-maneuver U.S. and European political leaders by advancing the prospects of South Stream, a proposed $21 billion natural gas pipeline from Russia to Europe, crossing underneath the Black Sea.
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In Ukraine, the gas bill is never paid: Ukraine's president faces Western pressure to free his political rival, former Prime Minister Yulia Timoshenko. But the signs are that Timoshenko (pictured above) instead will face a much longer period of prosecution, including the possible fate of former oil tycoon Mikhail Khodorkovsky, who crossed Russian leader Vladimir Putin and soon after was thrown in prison under sequential sentences. After Timoshenko was sentenced on Tuesday to seven years in prison, the weight of Europe and the U.S. fell onto President Viktor Yanukovich, who was accused of venting his political spleen in the courtroom. Yanukovich replied by saying that Timoshenko could yet be cleared of the charges, perhaps by legislative changes in Parliament. But if the conviction itself is not erased, Timoshenko could still be barred from running for office for a decade. As if to underscore that Yanukovich does not intend to call off the dogs, authorities yesterday unveiled new criminal charges against her, this time involving a $405 million debt that she is alleged to have illegally transferred from her former gas company to the government.
What seems to be getting lost in the gigantic brawl are the facts of the original case brought against Timoshenko. She is accused of exceeding her authority as prime minister with a natural gas supply deal she re-negotiated with Putin in 2009. But looking back at the contentious talks, it looks like she did pretty well. There were two main features of the deal: To shrink the price and volume of gas that Ukraine was obligated to buy, and to eliminate from gas dealings a shadowy middleman company called Rosukrenergo that earned hundreds of millions of dollars for providing no necessary services. She accomplished both of those. Did she strike a perfect deal? No -- it was flawed. On the other hand, Yanukovich himself went at Putin the following year. He did no better on price, and ended up giving away Sevastopol to the Russian Fleet for another 25 years to boot. Perhaps the biggest winners from all this hullabaloo are Rosukrenergo's principal, Dmitry Firtash, who is back in the middle of the Ukrainian economy, and the white-shoe Washington law firm of Akin Gump, which has been paid top-dollar to lead the outside criminal investigation of Timoshenko.
The dictator's playbook: You are a cosseted dictator in the world's most strategic place -- the hydrocarbon engine of the global economy -- but then a vegetable-seller sets himself on fire, and your life is suddenly upside down. How do you manage in this state of upheaval known as the Arab Spring? The response of the Middle East's king of kings -- Saudi Arabia's Abdullah -- is an attempt to stabilize not just himself, but the entire edifice of long-time U.S.-aligned Sunni autocrats who, among other things, worked with Washington to make peace with Israel, Neil MacFarquhar reports in the New York Times. The elderly Abdullah has sought to ease out Yemeni President Ali Abdullah Saleh (street scene in Sana'a pictured above), shore up the Bahraini ruling family with both troops and cash, stabilize Egypt with some $4 billion, and fundamentally undermine Iran, which he sees as fomenting the trouble for example in Bahrain. Combined, Abdullah's actions are pro-monarchy, and self-serving -- the Saud family believes it is personally entitled to the country's wealth, and cannot imagine a world in which it does not rule that stretch of oil-rich sand.
We understand Abdullah -- who wants to lose power and fortune? But we also notice his agile hybridization of the dictator's playbook, the limited number of options open to autocrats whose people pour into the streets. Generally, an autocrat has two alternatives, which for ease of clarity we call the Karimov and Shevardnadze plays. The latter refers to the decision by Georgia's Eduard Shevardnadze to step down in the face of massive 2003 protests in his country; the former suggests the calculus of Uzbekistan's Islam Karimov, who in 2005 gunned down hundreds of protesters in the city of Andijan. In trying to persuade Saleh to leave, Abdullah is invoking Shevardnadze; in bolstering Bahrain's al-Khalifa family, he is giving voice to his inner Karimov.
Notwithstanding the cleverness, we see the Karimov play shining through in Abdullah's calculus, because what is this all about but reinforcing the hold of the Saud family itself?
Flashpoint alert: Oil rush on the South China Sea Recall that last fall, China and Japan went to blows over an errant fisherman who rammed a Japanese naval cutter in the disputed, oil-rich waters of the East China Sea. In cutting off rare earth elements to Japan, China signaled yet again that it takes its ostensible rights to both the East and South China seas very seriously. Therefore, we ought to pay attention now that Vietnam and the Philippines are getting set to drill for oil in South China Sea waters claimed by Beijing. Bloomberg reports that Vietnam's oil partner, Talisman Energy, plans to begin drilling next year in the South China Sea; ExxonMobil intends to drill an exploratory well off of Vietnam's waters later this year; and the Philippines, with whom the United States has a defense treaty, plans to do similar exploration in the South China Sea. China's neighbors assert that often these claims are much closer to their own shores than to China's, but China has regularly dispatched ships to disrupt such oil work. Look for more such incidents in coming months.
Ahmad Gharabli AFP/Getty Images
For the last half-decade, one of the biggest -- and most menacing -- tales in energy has involved the shady natural gas business in Ukraine. The story has included three consecutive years of dead-of-winter heat cutoffs to major parts of Europe, Russian political bullies poised to pounce on the continent, and billions of dollars in alleged underhanded dealings. In sideshows, the West and Russia have unveiled dueling, multi-billion-dollar natural gas pipelines, and in December rowdy Ukrainian politicians erupted into a free for all in parliament. Now, the spectacle has spilled out into U.S. courts.
This latest episode in the saga centers on Rosukrenergo, a Swiss-based middleman company that earns billions of dollars by arranging for the shipment of natural gas from Turkmenistan and Russia through Ukraine and on to Europe. Granted, it's no simple matter to move raw materials of any type across former Soviet borders, as any trader will tell you. But this company has been the source of much mystery because of its scale of fees. Some people have wondered why Gazprom, for example, the mighty, muscular Russian natural gas giant, has been willing to share fees with this comparatively no-name company with no visible sign of geopolitical leverage.
A week ago, Yulia Timoshenko, Ukraine's former prime minister (pictured above), filed suit in U.S. federal court in New York against Dimitry Firtash, a Ukrainian billionaire who controls Rosurkenergo, and is allied with her blood enemy, Ukraine President Viktor Yanukovich. In a nutshell, she alleges that the Ukrainian government threw -- that is, deliberately lost -- a natural gas arbitration dispute in Stockholm that, as a result, netted Firtash, the plaintiff in the case, hundreds of millions of dollars in natural gas belonging to the Ukrainian state. An unspecified portion of these winnings, the suit alleges, went as a kickback either in cash or kind to finance the Yanukovich government's political and financial dealings.
Firtash's press service in Kiev, quoted by the Kiev Post, denied the allegations: "Fully supporting the ruling of the Stockholm arbitration, Mr. Firtash doubts that Ms. Timoshenko has any grounds to challenge this decision in New York's courts or any other judicial bodies," the press service said.
The suit is part of an uptick of a trend in which the politics of dysfunctional governments around the world are playing out in the courtrooms of western capitals, most prominently those of the United States and the United Kingdom.
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Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.