- The Washington Times - Tuesday, January 3, 2006

Russia is trying to almost quintuple the price of the natural gas it supplies to Ukraine. But it also shut down the flow of gas briefly, affecting countries to the west of Ukraine: Hungary, Poland and even Germany — in the middle of the winter.

By raising prices abruptly and cutting gas supply in the cold Ukrainian winter, Moscow is attempting to influence the outcome of the March parliamentary elections in Ukraine and deal a decisive blow to President Yushchenko, whom it perceives as pro-American and anti-Russian.

Such a sudden increase will be devastating for Ukraine’s economy and will raise serious questions about Russia’s reliability as an energy provider to the West. This while Russia just assumed chairmanship of the G-8.

For Moscow, tens of billions of dollars in investments and contracts are at stake — much more than the worth of Ukraine’s gas supply.

However, Ukraine also has its share of blame by ignoring the problem and not preparing its economy for the inevitable price hike. The current price of the Russian gas supplied to Ukraine, $50 a cubic meter, is one-third of what the Europeans are paying. Ukraine should have taken steps, such as creating a larger gas reserve, setting money aside for gas purchases, and signing contracts with other suppliers. But it didn’t.

The U.S. is interested in political and economic stability in Ukraine and Central Europe. Washington has also invested heavily in the success of Mr. Yushchenko’s administration.

U.S. energy companies are interested in expanding energy partnership with Russia, including the development of the giant Shtokman gas field in the Barents Sea. Therefore, the U.S. is supporting a gradual transition to market energy prices between Russia and Ukraine, while restarting the supply.

With that, the U.S. should clarify to Russia that its heavy-handed energy geopolitics is likely to backfire. Moscow may undermine its claim to be a major energy player in Europe and the world. It is in the best interest of Russia, Europe and the U.S. to de-escalate the crisis and move to a gradual schedule of price increases, while renewing the flow of natural gas to Ukraine.

Ariel Cohen is senior research fellow in Russian and Eurasian Studies and International Energy Security at the Heritage Foundation.



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