Gas as Political Tool

Without harboring any naivete regarding Russia/Gazprom’s use of energy supplies as a geopolitical weapon, it seems odd that a pricing dispute suddenly becomes a “gas war” (Danger Room) when Russia shuts off the gas, but not when Ukraine stops paying for it. Whether or not Ukraine owed $1.5 billion or $2.1 billion for November and December deliveries, they hadn’t made the payment (NY Times). And that’s independent of the price for 2009 deliveries.

Michael Hancock, writing at, says:

This comes as just another step towards normal usage of gas and oil aspolitical tools. The idea that some resources or elements ofinfrastructure could or should be sacrosanct might not be universal,but it is certainly appealing to those freezing in cold, deniedcitizens of Ukraine and Tajikistan, not to mention previous victims inIran and further down the pipeline last January.

To begin with, in this particular case, according to the Times article cited above, Ukraine has plenty of gas stockpiled and downstream transit hasn’t been affected.

On a more general level, though, maybe I missed something, but I’d been under the impression that gas and oil have always been political tools. In fact, I remember reading something about a future round of unilateral American sanctions against Iran that would, among other things, prevent it from importing the refined gasoline it relies on for its domestic consumption. And the Iran Sanctions Act levels penalties on any investment in Iran’s gas sector — a gas sector that, by the way, could significantly loosen the vice-like grip Russia now has on the European market (see Peter Doran’s WPR Briefing for more).

I don’t want to minimize the humanitarian aspects of cutting off heating fuel in the dead of winter (and if Paris is any indication, it’s a very cold winter in Europe this year). But even if Russia’s bargaining position has been hardened by the broader tensions between the two countries (and it almost certainly has), that seems like neither a surprise nor an outrage.

More interesting is the question of whether Gazprom is overplaying its hand. According to a recent IHT article, it’s carrying heavy boomtime debt into the financial downturn. Its dependence on foreign capital for infrastructure upgrades was problematic even before the collapse of the Russian stock market, when all investors had to worry about was corruption and Moscow’s tendency towards heavyhanded nationalization. And in order to lock up supplies to fulfill its future delivery contracts in the absence of developing its own reserves, Gazprom snapped up Central Asian gas at peak market rates over the past six months, just in time for the global downturn depressing demand and prices.

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