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Wed, 4 Jan 2006 Jerome Guillet is a banker familiar with Russia, he wrote his Ph.D. dissertation in 1995 on "The Independence of Ukraine" (in French). European Tribune is a collective weblog on current European and international issues which he edits A resolution of the recent gas crisis between Russia and Ukraine, which had led to a temporary cut of gas supplies to Ukraine and then to Europe, has apparently been found:
There are loads of suspicious things about this deal. First, the announcement is very suspicious on the price level. With Gazprom delivering 25 bcm (billion cubic meters) and another 35 bcm coming from Turkmenistan (via Gazprom's pipes), to get an average price at 95$/tcm for the total would require, if 25 bcm are paid 230$/tcm, that the other 35 bcm be delivered for free. The only way this might make sense is if the transit payment (increased from 1.09$/100km/1000tcm to 1.6$) is taken into account - i.e. the 95$/tcm would be the net price for Ukraine after the deduction of the transit fees. As they are worth about $1.5 bn at the new price, that would put a price of around 45-50$/tcm for Turkmen gas, which could be realistic. If that's the case, this is a very good deal for Russia, as they do get market prices for their gas, and they get cheap transit for their exports. But what makes this deal even more suspicious if the announcement that the full gas volumes (i.e. 60 bcm) are going to be delivered to Ukraine by RusUkrEnergo, a "Russian-Ukrainian joint venture". Digging stuff on that company is not that difficult, as it was already involved in a "precursor" scandal last summer over the exact same subject (Gazprom wanting to increase its gas prices to Ukraine). Guess what:
There's lots more background on this company, widely thought to be a front for mafia don (wanted by the FBI and Interpol for money laundering) Mogilevich, in this eerily prescient article from the Jamestown Foundation, or in this one in Kiyv Weekly, also from last summer:
Again, these are points that I have made myself: Gazprom fully controls that trade (Gazexport is its 100% subsidiary in charge of all exports, and it is the counterparty to ALL contracts with West European buyers), and yet it is only very indirectly a party to the new arrangements. Why the need for an Austrian company 50% owned by a front companyfor persons unknown? Of course, the arrangements announced today are nothing new, it's the same thing which is renegotiated every year, with different shell companies (like Itera, EuralTransgas, and many others in the past 10 years). What is obvious, to me at least, is that these deals are not driven by the best interests of Gazprom or of Russia, but by those of people in power in both. Which leads to us to the big question: why did Putin actively participate in this "crisis" this time, when earlier episodes were resolved far from the eyes of the West? It has spectacularly backfired: the only apparent result today is to make Russia look foolish (because they backed down on their threat so quickly) and irresponsible (because they used the gas weapon for what appears to be bullying of a smaller country escaping its clutches - Note to my Russian readers: appears is the operative word here. As the Financial Times writes today in a lenghty article:
So why did Putin do it? He must know all of this. The usual motivations are given: punishing an unruly neighbor who wants to turn its back on Russia yet keep on receiving subsidies, taking control of the pipeline network, or signaling Gazprom's power to everybody, after a phase of concentration of the industry under the control of Kremlin bureaucrats. It sounds like a page from the Cheney book of diplomacy "who cares if they hate us so long as they fear us", based on a position of strength. The problem is that Russia is not in a position of strength, even on the gas front, and Putin must know it (the people at Gazprom I knew have always been perfectly aware of this - they know they have no bigger asset than their reputation for reliability, and they know that they cannot cut off gas to Ukraine). So, how was he brought into this? Simply, there are two possibilities:
Again, any deal with Turkmen gas requires the active participation of managers at the very top of Gazprom and of the Kremlin (you don't move 30bcm of gas across its pipeline network, which is inaccessible to third parties on a open basis, without high level complicity, and you don't do international deals without support/complicity in the Kremlin). You don't create a highly public crisis with Ukraine without knowing the international repercussions of it (in the aftermath of the Orange revolution), and you don't cut gas to the West without expecting harsh words in return. Now, whether that was triggered by Ukrainians moves on their side of the table, or by new impetus on the Russian side, and whether the underlying conflicts have actually been resolved, (things like the real ownership of RusUkrEnergo, the price paid by big metal-bashing factories for their gas in Ukraine, and the price paid for Turkmen gas and for its transit via Russia), I don't know. Some people obviously thought that their personal advantage in this crisis trumped the consequences for Russia of this diplomatic fiasco. Who are they?
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