News / Economy

Putin's Energy Threats Come with Cost to Russia

Putin's Energy Threats to Europe Come With Costs for Russiai
X
April 11, 2014 5:12 PM
Russia is again using its role as Europe’s dominant natural gas supplier to pressure Ukraine and the West. Europe gets about 30 percent of its gas from Russia, and half of that passes through Ukraine. But how much leverage does Russia really have in using energy exports to achieve diplomatic or geopolitical objectives in Europe? VOA’s Mary Motta reports from London.
Mary Motta
— Russia is again using its role as Europe’s dominant natural gas supplier to pressure Ukraine and the West. Europe gets about 30 percent of its gas from Russia, and half of that passes through Ukraine.  But how much leverage does Russia really have in using energy exports to achieve diplomatic or geopolitical objectives in Europe?

When former president of Ukraine Viktor Yanukovych met with EU foreign policy chief Catherine Ashton in December 2013 he was expected to sign key trade and political agreements with the European Union.

But to the dismay of many Ukrainians, Yanukovych turned down the deals on the advice of Russian President Vladimir Putin, who tempted the former president with the promise of cheap gas.

Considering the large amounts of Russian gas Ukraine burns through every year, the deal seemed like a good one for Yanukovych.

But since Yanukovych's ouster amid massive protests in February, Russian gas has become more of a punishment than an enticement.

Price hike

Last month, Alexei Miller, the chief executive of Russia’s gas giant, Gazprom, agreed with Russian Prime Minister Dmitry Medvedev to impose a 44 percent increase in the price of gas sold to Ukraine.

With the price boost, Ukraine now owes Gazprom $2.2 billion. If Ukraine continues not to pay its bills - and without outside help, it cannot- Gazprom can cut it off.

This is potentially bad news for Europe, says Antony Froggatt, a senior research fellow with Chatham House. He says Russia will likely continue to use gas as a political tool.

“The Russian economy is heavily dependent on energy,"  he explained. "And, so if it no longer sees potential and economic benefit from supplying Ukraine at lower prices, then it will increase it [the price]. And, it’s always that … changes we’ve seen in Europe over the last couple of months.”

But this time, the threat is not as ominous as it was during price disputes in the winters of 2006 and 2009. European countries have since found other options for meeting their energy needs, and, in any case, will not rely on Russian gas in the summer months. And though most European countries refill their storage facilities at this time, those facilities are likely well stocked after a mild winter.

“The previous sort of Ukraine gas prices in 2006 and 2009, there was a different situation because: A, it was winter; B, the EU as a whole was more dependent on Russian gas; and, C, more of that Russian gas came through the Ukraine and more of it is diversified, so it goes around the Ukraine,” Froggatt said.

Russia must also consider the cost to its own economy of withholding gas exports, which provide its most important source of revenue. Whatever Vladimir Putin's geo-political ambitions, most energy analysts seem to agree he will think twice about jeopardizing that revenue.

EU working on plan to help pay for gas

In Vienna Friday, European Energy Commissioner Guenther Oettinger said he is working on a plan to help Ukraine pay some of its gas bills to Russia.  According to a Reuters report, he told Austria's ORF radio on Friday, there was "no reason to panic'' about Russian gas supplies to Europe.

"We are in close contact with Ukraine and its gas company to ensure that Ukraine remains able to pay and the debts that the gas company has to Gazprom do not rise further,'' Oettinger said, adding he would meet Ukraine's energy and foreign ministers on Monday.

"I am preparing a solution that is part of the aid package that the IMF, the European Union and the World Bank is giving to Ukraine and from which payment for open bills will be possible,'' he said.
     
Oettinger advised against taking Putin's threat at face value, saying Russia wanted to deliver gas and needed the revenue.

"Part of the bills is justified. Another part is unjustified. We will put together a package in the weeks ahead so that paying the justified open bills will be possible, but not according to Mr. Putin's accounting but rather by what is contractually correct,'' he said.   

Some information for this report provided by Reuters. 

You May Like

Video On the Scene: In Gaza, Darkness Brings Dread and Death

Palestinians fear nighttime raids, many feel abandoned by outside world, VOA's Scott Bobb reports More

African Small Farmers Could Be Key to Ending Food Insecurity

Experts say providing access to microloans, crop insurance, better storage facilities, irrigation, road systems and market information could enable greater production More

University of Michigan Wins Solar Car Race

Squad guided its student-designed solar-powered vehicle to fifth consecutive time victory in eight-day bi-annual American Solar Challenge More

This forum has been closed.
Comment Sorting
Comments
     
by: Anonymous
April 12, 2014 9:29 AM
Dasvadania


by: Anonymous
April 12, 2014 12:42 AM
The hike in gas price seems entirely evil.
Too bad Putin is in power, Russians deserve a leader with ethics.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Gazans in Shelled School Sought Shelteri
X
Scott Bobb
July 30, 2014 8:16 PM
Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video A Summer Camp for All the World

VIDEO: During workshops and social gatherings, the Global Youth Village summer camp encourages young people to cooperate and embrace their differences, while learning to communicate with people from other countries. VOA's Deborah Block has more.
Video

Video From Cantankerous Warlock to Incorruptible Priest, 'Harry Potter' Actor Embraces Diverse Roles

He’s perhaps best known as Mad Eye Moody, the whimsical wizard in the Harry Potter franchise. But character actor Brendan Gleeson's resume includes dozens of films, and he embraces all the characters he inhabits with equal passion. In an interview with VOA’s Penelope Poulou, Gleeson discussed his new drama "Calvary" and his secret to success.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.