Tuesday, December 06, 2005

Gas Attack!

From Kiev Ukraine News Blog: Kremlin Uses Energy to Teach Ex-Soviet Neighbors a Lesson in Geopolitical Loyalty
Russia's state-run energy giant Gazprom has long sought to boost profits by ending subsidies to former Soviet states. Next year prices for new European Union members Estonia, Latvia, and Lithuania will increase by half to between $120 and $125 per 1,000 cubic meters, Gazprom's top executives recently announced.

The price Ukraine will have to pay for the Russian gas supplies will more than triple -- to at least $160 per 1,000 cubic meters. Georgia and Armenia will pay about $110 next year, and Moldova will pay between $150 and $160.

Gazprom explains the move by pointing to the rise of energy prices on global markets. (The average price for natural gas in Western Europe is currently about $200 per 1,000 cubic meters.)

"This is not politics, Gazprom isn't under pressure from the government," Alexander Ryazanov, the company's deputy chief executive, said in Moscow on November 29. "This is simple economics."

But some key Russian policymakers have made it absolutely clear that the gas monopoly's Kremlin supervisors are being guided by more than an economic rationale. They bluntly say that Moscow will continue to subsidize energy supplies to its "allies."

At the same time, it will promote "purely market mechanisms" in bilateral relations with those neighbors that are not sufficiently loyal and that display a "suspicious" geopolitical orientation. "We simply suggest applying market principles while doing business with those countries with which we don't have an alliance-type relationship," argues Konstantin Kosachev, chairman of the State Duma Foreign Affairs Committee.
Read the rest for more information.