Watching the Russian & Ukrainian energy dispute with eggnog

The cold Christmas and New Years holiday meant the oil dispute between Russia and the Ukraine was subdued with spicy eggnog.  This year the dispute was not over gas but oil.  Probably the best preparation for this non-crisis was in the form of sitting by the fire and letting it play out.  For both Russia and the Ukraine to repeat their dispute from a year ago would have been akin to shooting their other foot (the first foot being shot last year).

The assurance of security of energy supplies from Russia to Europe, since last years gas dispute, has become an important consideration in EU energy policy.  While there has not been a significant change in energy policy, the awareness exists that further disruption could lead to concrete action from the EU. This would be good news for those in Central Eastern European states who have been trying to make their case that Russia is an unreliable energy partner. The cautiously neutral position of Brussels would have shifted to see Russia (and the Ukraine) as unreliable suppliers. The result would be a greater emphasis on shifting to alternative energy routes and supplies.

For this post-non-crisis discussion the reasons for the initial dispute then must be understood. Is it, as suggested, a political ploy for boosting Ukrainian President Viktor Yushchenko’s reelection bid or was it an actual ‘commercial’ disagreement? The aftermath of the 2009 gas crisis, shows the purely ‘commercial’ dispute between the two countries involved a significant amount of political posturing. Prime Minister Putin came out with his usual verbal assault, “We are ready to deliver, we have a contract, but if any of the transit countries abuse, what can you do?” While the main political contenders in the January 17th presidential elections Prime Minister Yulia Tymoshenko and President Viktor Yushchenko sought to play it up, but as it turns out, resolve the ‘crisis’ right at the deadline with a 30% boost for the Ukraine’s transit fees. Thereby lending a concession for Yushchenko, who can demonstrate his ability to negotiate with Russia.

While the curtain drops on the act, I have to applaud the gamesmanship in creating a non-crisis, or rather elevating a regular serious discussion over commercial activity into the political arena for domestic consumption. In the last few days, we can also see again the replay of the 2009 gas crisis, with the cutting of oil shipments to Belarus. With significant stocks held by Belarus, the question must be raised whether it is a commercial dispute or political dispute. Either way the best approach for Europe may be to sit tight with the eggnog in hand, plans at the ready and action to be taken once an actual security of supply threat materializes. Let’s just hope there is enough eggnog to last.