Russia and Ukraine have ended their spat over natural gas prices. Ukraine will pay more, but much less than Russia originally demanded. That's the good news.
The bad news is that the outcome owed little to Western diplomacy. Ukraine, a budding democracy, deserves Western support. Europe squawked when Russia cut its gas supplies, but that hardly amounted to a coherent policy of backing Ukraine against what was a huge--albeit spectacularly inept--Russian power play.
When the quarrel began last week, it looked like a huge mismatch. Gazprom, the Russian energy giant, had slapped its 400%-plus natural gas price hike on Ukraine just as winter gained hold and Ukrainian President Viktor Yushchenko faced a financial crisis. Dependent on Russia for 30% of its natural gas, Kiev seemed certain to cave.
The Kremlin's hard-line approach had two objectives. It covets Ukraine's natural gas pipeline system (Gazprom wants a 51% share), and it seeks to undercut Kiev's pro-Western policies so Ukraine will remain in Russia's sphere of influence. Short of that, Russian President Vladimir V. Putin wanted to demonstrate the steep costs of spurning Moscow to dance with the West.
Ukraine was not without countermoves, among them a declaration of sovereignty over the waters of the Kerch Strait that would allow third-party access (read: NATO ships) to the Sea of Azov, and a threat to leave the Russian-led Commonwealth of Independent States.
When Yushchenko refused to back down, Russia, realizing that it would look foolish for making empty threats, turned off the spigots and dragged Europe into the dispute, which proved to be Moscow's undoing. Europe relies on Russia for about one-third of its natural gas, and most of it is delivered through Ukrainian pipelines.
The biggest loser was Gazprom, whose role as a stalking horse for Kremlin intentions became evident. The nominally private company insisted that market forces dictated its price increase for Ukraine, but closer inspection revealed that attitudes toward Russia were a better indicator. For instance, Belarus, a Putin ally, pays one-fourth the price that Gazprom demanded from Ukraine.
The Kremlin was tarnished as well. It made a mockery of Gazprom's pretensions of independence when Putin essentially took over the negotiations for the Russian side. And its demand that Ukraine absorb an all-at-once price increase made it look like an extortionist.
Worse, the Europeans began wondering whether Russia was a reliable source of energy. And Gazprom's cavalier disregard for the pricing accord it had signed with Ukraine in 2004 raised questions about the state of reform in Putin's Russia, specifically its attitude toward the sanctity of contracts.
The European Union, then, rescued Ukraine not out of magnanimity or principle but because it didn't want a cold winter. Germany, which is not given to criticizing Moscow, called on Russia to "act responsibly." Other EU states chimed in as well.
Ukraine faces more price increases, which will force it to make some painful economic choices. Moscow will undoubtedly seek political advantage and a larger footprint in Ukraine in exchange for any concessions to smooth the transition.
But this cloud could spark a much-needed transformation of Ukraine's inefficient Soviet-era industries. And that's something Kiev must do if its plans to integrate with the West and join the EU are anything more than rhetoric.
There is much the West should do to help Ukraine as the most important democratic state to emerge from the debris of the Soviet Union reforms its economy and tries to lessen its dependence on Russia. Stoking anti-Russian sentiments or making false promises is not what's needed. Instead, Kiev needs sustained and multifaceted engagement from the West, despite Russian complaints of "interference."
In this latest flap, Moscow has again shown that it will use its muscle to try to shape its neighbors' politics and foreign policy. Ukraine is roughly the size of France--too important to concede to Russia as a client state. Russia wants more trade, more foreign investment, a voice on major international issues and membership in the World Trade Organization, and the West should exploit these ambitions to shape the Moscow-Kiev relationship.
Copyright 2006, Los Angeles Times