Russia’s military and diplomatic opposition to the overthrow of former Ukrainian President Viktor Yanukovych has raised concern that Russia might cut off Ukraine’s gas as it has in previous disputes, disrupting broader European energy markets. In an email interview, Keith Smith, a former U.S. ambassador to Lithuania who is currently a distinguished resident fellow at the Center for European Policy Analysis, explained how Russia’s leverage over energy markets has changed since it last cut off gas supplies to Ukraine. The views expressed here are Smith’s and do not represent those of any organization.
WPR: How has Ukraine’s position in the energy chain changed since its 2008-2009 gas disputes with Russia?
Keith Smith: Ukraine continues to have a significant problem paying for imported gas from Russia. Russia’s state-owned gas company Gazprom announced that on April 1, the price it charges Ukraine for gas will return to the old, expensive $450 per thousand cubic meters (TCM), versus the $265 TCM Ukraine is paying now. Hopefully, the Western community will help Ukraine pay its import bills, at least over the short term. The International Monetary Fund has agreed to provide a substantial loan to Ukraine, possibly $15 billion, but the new government will have to meet the politically difficult condition of increasing the price of gas to domestic consumers. I suspect that it will, now that its back is to the wall.