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Gas Dispute: Russia Taking Full Advantage

Tuesday, Jan. 6, 2009

Last week, Judah wondered why a dispute over gas payments between Russia and Ukraine only begins to be called a "gas war" when Gazprom cuts off the gas, but not when Ukraine refuses to pay for it.

If there is indeed a tendency among the Western press (and blogs) to paint these sorts of conflicts as exclusively precipitated by Russia, then that might owe as much to an unwillingness to delve into the underlying economic issues as it does an inherent anti-Russian bias.

So I've been turning to the financial press lately to get some alternative views. And, perhaps unsurprisingly, I found more sympathy for the Russian position there. Writing at the financial opinion Web site Breakingviews.com, for example, Pierre Briançon says Ukraine is as much to blame as Russia:

The dispute has made it clear that Ukraine is a mess. On the political front, a bitter rivalry between its president and prime minister, former allies in the "orange revolution," made it difficult for Kiev to come up with a coherent negotiating position. On the financial front, Ukraine, with is sinking currency, could hardly buy the dollars it needed to settle its outstanding debt with Gazprom.

Things aren't looking better on the industrical front: Ukraine's gas infrastructure is in a dire state, according to most observers. . . .

As a result of this situation, and the fact that Russia has done a better job of painting this latest dispute in purely commercial terms, Russia's hand has been strengthened, says Briançon. In the future, the EU may be more receptive to Russian pipelines that bypass Ukraine and the rest of Eastern and Central Europe, such as the planned Nord Stream pipeline, which would go from Russia under the Baltic Sea directly to Germany.

UPDATE: Paul de Zardain examines the Russia-Ukraine price dispute in WPR today (Jan. 7).

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