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Russia reaffirms energy role

MOSCOW — MOSCOW -- Russia denied yesterday that its temporary cutoff of gas supplies to Ukraine this week in a pricing dispute raised doubts about its ability to act as a responsible energy supplier to Europe. But a Foreign Ministry official admitted that there are "certainly ... political factors" in Moscow's aim to maintain a strategic pathway for energy to Europe.

"In areas where economic interests coincide with objective national interests, certainly the issue of politics come into play," Alexei Sazonov, a Foreign Ministry spokesman, said in an interview. "Those who know Russia's current economy understand that without this energy bridge [through Ukraine to Europe], Russia will not be able to fuel the further growth and development of its economy."

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As Russia assumes the chairmanship of the Group of Eight of the world's most industrialized nations this month, U.S. Secretary of State Condoleezza Rice accused Moscow yesterday of seeking to sharply increase the price Ukraine pays for its natural gas "with an obviously political motive."

"That kind of behavior is going to continue to draw comment about the distance between Russia's behavior on something like this and what would be expected by a leader of the G-8," she said.

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The Russian Foreign Ministry said it was "surprised ... and completely unclear" as to the basis of the secretary's statements. Russia "consistently declared that whatever happened, it would carry out its full obligations for European gas deliveries," the statement said.

It said Russia was attempting to end an old "opaque" barter system of gas supply "that created numerous opportunities for abuse."

Many in Ukraine say Russia nearly doubled its gas prices to its former Soviet neighbor in an attempt to undermine Ukraine's newly pro-Western government on the eve of crucial parliamentary elections.

Sazonov said Russia's real "political" interests concern the nation's ambition to move to a market-based, commercially viable relationship with its energy clients and assure an uninterrupted supply line for its products to crucial markets in the West.

The conflict with Ukraine also pointed up Russia's move to gain control not only of energy supplies but also the pipelines that carry them to foreign markets.

The $47 per thousand cubic meters Belarus pays for Russian gas - half what Ukraine will be charged - is thanks not only to President Alexander Lukashenko's friendly relations with Moscow but also to Russia's 100-percent ownership of the pipeline that transports Russian gas to Europe.

Russia also holds stakes in gas distributors in Estonia, Latvia and Lithuania, and, significantly, it has given those nations longer to change to full Western European-level prices than it originally offered Ukraine.

These Baltic nations pay about $120 to $125 per thousand cubic meters.

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Volodymyr Horbulin, senior counselor to Ukrainian President Viktor Yushchenko, said in an interview this week in Kiev that Russian President Vladimir Putin "is offering an energy initiative in which Russia becomes not only the main supplier of oil and gas, but also owns all the oil and gas transportation systems. In other words, Russia becomes No. 1 - an absolute monopolist in the supply of gas and oil, at least for Europe."

Sazonov said Russia's arguments for pipeline control are "rational and market-based."

The deal finally signed this week calls for Ukraine to pay $95 for a mix of Russian and Central Asian gas purchased through Rosukrenergo, a little-known company that is half-owned by Gazprom.

Critics in Ukraine said the fine print makes it clear that Russia will collect more for its gas than it appears. They said a provision for Ukraine's national gas company to bring "other assets" into its new joint venture with Rosukrenergo could allow Russia to get its hands on some or all of the pipeline system.

"This part of the agreement means that part of the gas transit system of Ukraine, our strategic asset that provides us with an important geopolitical position, [is threatened]," said former Prime Minister Yuliya Tymoshenko, who has announced plans to challenge the pact in court. "This agreement betrays the national interests of Ukraine."

Kim Murphy writes for the Los Angeles Times.


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