The Spectator

Putin plays the market
Paul Robinson

I don’t believe that I can be alone in having spent a Russian or Ukrainian
winter with the windows of my room wide open. Many buildings in that part of the
world are dreadfully overheated, for the simple reason that energy is so cheap.
Soon, however, Ukrainians will have to learn to close their windows. Until this
week, the Russian gas company Gazprom charged Ukrainian consumers $50 for every
1,000 cubic metres of gas they used. On Sunday Gazprom demanded that they pay
$230. The Ukrainians’ first response was to refuse, and the Russians turned off
the gas. The choice, it seemed, was expensive fuel, or no fuel at all. On
Wednesday, the Ukraine agreed to pay $95 per 1,000 cubic metres for a mixture of
Gazprom supply and cheaper gas from Central Asia. Gazprom has, for the moment,
said it is satisfied.

What’s going on? With the collapse of Soviet military and economic might,
Russia was left with very few means with which to influence the world around it.
Now rising energy prices have handed Moscow a new weapon. Russia has 30 per cent
of the world’s natural gas deposits and 10 per cent of the world’s oil. Oil and
gas production in the rest of Europe is declining, and within a few years the
European Union will import about half of all its gas from Russia. This gives
Russia great leverage over its neighbours, and the Russian president Vladimir
Putin is showing clear willingness to use that leverage.

We Brits love an underdog. As Robert Baden-Powell harrumphed in his classic
Scouting for Boys, ‘If you see a big bully going for a small weak boy, you stop
him because it is not “fair play”.’ Gazprom’s price hike provoked great howls of
indignation in some circles of the British press, particularly as Russia has
this week taken over the rotating chairmanship of the G8, and the issue will
certainly embarrass Western leaders. According to the Daily Telegraph, ‘The
methods of gangsterism and blackmail now being used by Gazprom are reminiscent
of the Soviet era.... The West has to tell Russia that, plainly and simply, its
conduct is unacceptable if it wishes to remain part of the club of civilised
nations.’ Unfortunately for those spinning this simplistic tale of bully and
bullied, Gazprom’s ‘unacceptable conduct’ is actually something we have been
requiring of it. For in raising the prices they charge for gas in Eastern
Europe, the Russians are merely going part way towards meeting demands made by
the European Union over several years.

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