The Talking Dog

January 7, 2006, It's a gas, gas, gas...

While we were wacthing sundry things like the domestic horror of the loss of a dozen miners in West Virginia, the ongoing horrors in Iraq and a possible death-vigil for Israeli PM Sharon... Russia and Ukraine were having a conflict over the provision by Russia of natural gas to Ukraine (Russia supplies around a third of natural gas used by the former Soviet Republic). At one point, the Russians dramatically televised the act of their gas monopoly ("Gazprom") turning off the valves sending gas into Ukraine.

Well, it appears, via our comrades at Pravda, that a compromise has been reached. Ukraine will pay the market price for Russian natural gas (around $230 per 1,000 cu. mtrs.) This was, of course, the price that Ukraine which had been paying around $50 per 1,000 c.m., refused to pay, resulting in the crisis. Ah, but I said Russian gas; for Kazakh and Uzbek and other gas acquired from Gazprom's non-Russian monopolies, Ukraine will only pay $95. In addition, the transfer fee paid to Ukraine to move gas across it into the rest of Europe will be increased. The deal also applies to former SSR Moldova.

So what's going on here? Gas prices-- in an inexact lockstep with oil prices-- have soared. Russian revenue is up, up, up. Russia has been getting far more for its gas on the open market, and far less for it from former Soviet Republics. So... Russia wants to increase revenues from them. So far, so good. Except some former Soviet Republics are more equal than others. Byelorusse, for example, which has an authoritarian government with very warm relations with Moscow, will continue to get very favorable treatment in its gas purchases. Ukraine, the site of the recent "Orange Revolution" which installed less pro-Moscow and more pro-Western Victor Yuschenko... less so.

In other words, Putin's Russia intends to use its economic might (in this case, energy, the mightiest might it has) to advance its political interests. It should come as no surprise that Russia is willing to do this; it would be more surprising if they were not. But as it looks like Russia is poised to be the world's big swing oil producer, this is just something we have to keep in mind. Particularly as we continue to weaken our own economic might with our record government deficits (we won't even talk about our trade deficits).

An ongoing cautionary tale. If Ukraine-- one of the poorest countries in Europe-- had any alternatives to Russian gas, besides a radical cut-back in economic activity or having large portions of their population freeze to death-- then I'm sure it would have hung tougher in all this. The United States, by contrast, still has lots of options, other than consuming as much energy as fast as possible, which seems to be our only strategy.

Perhaps if and when we elect a grown-up more concerned with the nation's power than with accumulating his own personal power (including power tools), we can come to the national realization that being a powerful nation means more than only being able to project force in the Third and Fourth Worlds.