- The Washington Times - Wednesday, January 14, 2009

ANALYSIS/OPINION:

The past week has witnessed the entirely predictable collapse, in the dead of winter, of international energy commerce on the European continent. The expressions of concern over the energy security of Ukraine and the European Union, however, should not obscure the fact that Ukraine, once again, has cast a commercial dispute over the natural gas pricing between the Ukraine’s Naftogaz and Russia’s Gazprom into a morality play for Western audiences and its own citizens. The tactic may play well in domestic politics, but it is not an appropriate stance for an aspiring EU member.

The January 2006 predecessor to the standoff concerned the same issues - nonpayment for previous deliveries and the price of gas in the coming year - but it was not the first time that Gazprom confronted the issue. That was in February 1993. Similar standoffs occurred repeatedly in the intervening years, despite continuing Gazprom price subsidies. In response, Naftogaz has continued its policy of late payment while Ukraine stirs up Cold War anxieties in the West in pursuit of sweetheart deals and payment holidays.

Naftogaz has not been singled out for price discrimination. Gazprom has been phasing out all legacy price subsidies to former Soviet Union countries and even its Russian gas customers. The last Gazprom offer on the table in December prior to contract expiration priced Ukrainian gas sales materially below prevailing Gazprom prices to the EU.

The real culprit in Ukraine’s energy woes is its moribund economy, decaying energy infrastructure and inefficient use of its gas purchases: The Ukrainian economy requires twice the energy input of Germany per dollar of GDP. If the EU truly wants to help the situation, it should be addressing Ukrainian economic development and energy efficiency.

TIMOTHY

F. SUTHERLAND

CEO

Pace Global Energy Services LLC

Fairfax

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