• 2006-01-04
It's an awfully familiar scenario. Country "A" says it wants to cooperate closer with country "B", and this makes country "C" jealous. Country "C" says, "You'd best not do that," but country "A" simply responds, "We will anyway 's there's nothing you can do to stop us." Flustered, enraged, country "C", which has all the resources, resorts to the one lever it has and stops supplying country "A" with life-sustaining resources. Country "A" plays the victim, country "B" (which also suffers) tries to mediate, and country "C" eventually backs down.

If there is any comfort in the Ukrainian-Russian standoff over natural gas prices and transit, it is in the fact that the entire contretemps is unfolding according to a script written years ago. Ukrainians can take heart in the knowledge that many East European countries have already been through a similar crisis, particularly the Baltic states when they broke away from the Soviet Union 15 years ago. Moscow bristled at the loss of empire, cut off energy supplies to the three countries, and millions of Balts were forced to spend several winter months in the frigid dark.

Therein the irony: there is probably no better gauge for Ukraine's leadership that their country is on the road to Western integration than to suffer a Russian energy embargo.

At the same time, there are many valuable lessons to extract from this natural gas tussle. First, energy prices are heading up, both for the Baltic states and other East European nations. It's an unpleasant fact of life, but one we're going to have to learn to live with. On a purely economic basis, Russia has the right to demand that consumers pay the market price for oil, gas, coal and other resources.

Second, the Kremlin will continue to use their raw material wealth as a lever of influence. While Moscow is raising gas prices for Ukraine (from $50 to $230 per 1,000 cubic meters for Ukraine, according to information on Jan. 4), it agreed late last year to continue supplying Belarus at previous prices. There is no economic logic to such a discrepancy (they're all eastern Slavs, after all), only cold political rationale. Alexander Lukashenko toes the Kremlin line, Viktor Yushchenko doesn't, so the latter must pay more for Russian energy.

Third, energy diversification must remain a high priority, for both the European Union and the Baltic states. The recent initiative by Lithuanian authorities to invite foreign investors to participate in constructing a new power plant (even though there's no funding yet) must be saluted. Other projects, such as the underwater electric cable in the Gulf of Finland and the power bridge between Lithuania and Poland, should not be delayed.

A Kremlin adviser who resigned his position last week, Andrei Illarionov, uttered a few prophetic phrases during his final press conference. "This year Russia has become a different country. It is no longer a democratic country. It is no longer a free country," he said. Kremlin bullying on natural gas is one of the many manifestations, and it remains for the West to respond.