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From The Times
January 15, 2009

Putin has given us a wake-up call: we're vulnerable to blackmail

The game Russia is playing with its gas is not just a European problem. It exposes Britain's dangerous energy dependency

Rosemary Righter

It is hard to decide which is more despicable, the virulent untruths issuing from the Kremlin or the readiness of gas-starved European politicians to gang up on Ukraine. Russia's insistence that the gas is there, if Ukraine would only pump it through, is pure KGB-speak.

Tuesday's ceremonial reopening of the taps that Gazprom should never have turned off was a propaganda stunt, no more. What went through was a trickle, halted after a few hours. Not only that, but Gazprom insisted that its “trial” shipment be moved along a pipeline that Ukraine needs for domestic use, to supply Odessa and other cities. To ship it through to Europe, Ukraine would have had to deny heating to its own citizens. Small wonder EU monitors met with Russian obstruction.

Gas flows to Europe will resume only when Vladimir Putin decides that Russia has successfully pinned the donkey's tail on Ukraine. But an end to the immediate crisis will not alter the fact of Europe's vulnerability to Russian caprice. The Russian Prime Minister has done what no Soviet leader did - made Russia's key national asset an instrument of political blackmail. He has done it before, in 2006; he could do it again.

Forget about this being a “commercial dispute”, as the EU supinely affects to believe. Russia made no serious attempt to solve its pricing dispute with the ineffectual and divided Ukrainian Government. This is a Kremlin “cold war” against Ukraine's dream of belonging to the West. When Mr Putin - not Gazprom's management, note - ordered the gas to be cut off to Europe as well as Ukraine, the point he was making was political, and it was this: if shivering Europeans want secure supplies of Russian gas, they must either invest, with Gazprom, in new pipelines under the Baltic and Black seas that would bypass “unreliable” Ukraine, or trust Russia to secure Ukraine's future “reliability”. If you want your gas, in other words, hands off Ukraine.

Mr Putin makes no bones about it. Russian oil and gas are his weapons of choice in a battle to reassert Russian dominance over its lost empire, to weaken European resistance to that grand design, and to reclaim respect and fear for Russia as a great power. His grand strategy is to make Gazprom, the queen of the global energy chessboard, a cartel with a reach that spans China, Africa and Latin America. Gazprom is, as Mr Putin says, already “a powerful lever of economic and political influence in the world”.

The EU responded to the first Russian cut-off in 2006 with an “energy security” plan: to diversify supplies, to build more gas storage and an EU-wide gas network, and to negotiate as one with Russia. A few more storage tanks got built, though not in Britain, which incredibly has only two weeks' worth of storage compared with nuclear-rich France's eighteen. But the EU soon returned to its obsession with carbon emissions. Individual countries, Germany foremost, rushed to do sweetheart deals with Gazprom.

After this latest alarm call, there must be no hitting the snooze button. Whatever EU emissions targets say about reliance on renewables, those targets rely heftily on gas, which provides a fifth of European electricity. A quarter of that gas comes from Russia, 80 per cent of it via Ukraine. With Russia busy bribing Azerbaijan to cold-shoulder Europe's proposed Nabucco pipeline to transport its gas to Austria via Turkey, and Gazprom muscling in on a projected trans-Saharan gas pipeline from Nigeria to Europe via Algeria, Europe is stuck with high - and growing - dependence on gas that Gazprom, aka the Kremlin, controls.

This may seem a continental rather than a British emergency, but that is wishful thinking. Britain is already short of generating capacity and will lose a third of the existing 60-gigawatt supply by 2020, as old coal-fired and nuclear stations are decommissioned. Within six years - a blink of an eye in the generating industry - Britain's energy gap will endanger the national economy.

A German consortium formed by E.On and RWE announced plans this week to build four new nuclear plants that could plug half of Britain's energy gap, and EDF, which has just acquired British Energy, plans four more smaller ones. But because Britain wasted a precious decade pretending it didn't need or want nuclear energy, they cannot be built in time to head of serious shortages. Offshore wind power cannot plug the gap. Ed Miliband's green light for new coal-fired stations is a U-turn born of desperation. But gas will be a vital part of the solution, and Britain's North Sea gas is rapidly running out.

So Britain, too, is doomed to turn to Gazprom, and has as much interest in countering Mr Putin's blackmail as Bulgaria. It used to be thought that because Gazprom earns 60 per cent of its revenue from Europe, the contractual relationship was stable. Clearly, it is not.

Gazprom under Mr Putin is about control. Gazprom has been moving downstream in Europe, buying up hunks of gas infrastructure and developing joint ventures with European companies all the way “from the well to the end consumers”. It is moving in on Europe's energy assets unobstructed despite the strict limits - and foul play - that dog foreign investors in Russian oil and gas fields, where Royal Dutch Shell and BP have got badly burnt. Europe's supplies will be even more vulnerable once the eastbound trans-Siberian pipeline is built and China bids against it for Gazprom contracts.

But the Kremlin picked a bad time for this showdown. A year ago, Gazprom's market capitalisation made it the world's third-largest corporation, after ExxonMobil and General Electric. Dazzled by Gazprom's “trillion-dollar business” prospectus, investors overlooked its splurging on acquisitions to the neglect of vital infrastructure. But the credit crunch and falling energy prices have temporarily spiked Gazprom's guns. Its share price is down 76 per cent; its debts are $50 billion. Given its huge revenue flows, Gazprom is not broke. But it cannot keep gas flowing from its existing fields and also find £32 billion to finance two pipelines that would bypass Ukraine, the Nord stream under the Baltic and the South stream under the Black Sea.

These pipelines are key to Mr Putin's divide-and-rule strategy. The Ukraine bust-up, he hopes, will frighten the Europeans into putting up the cash. Instead they should bin both projects. The EU should offer to arbitrate a fair and durable settlement with Kiev, adding that Ukraine has all the pipeline capacity, thank you, that Europe needs. The EU should insist further that Russia open its energy sectors to foreign investment, or face a block on Gazprom ventures in Europe.

Above all, reliance on Gazprom must be reduced. Britain should lead a crash programme of investment in liquefied natural gas technology, to ship gas from big producers such as Qatar. The fact must be faced: British and European energy security has got lost in the greenery. It should never have been neglected. After this spell in Putin's freezer, cooler heads must now prevail.

Gazprom needs to squeeze every dollar now to cover its 61 USD billion of debt. That’s why they want to double or triple the price for everyone who will show weakness, they’re like dogs that can smell fear. Other countries should understand that they will get the same approach with blackmail and etc.

Dimitry, Kiev, Ukraine

More and more I'm being convinced that western press is highly predetermined. They have a subtantial position against Russia but rarely any substantial arguments for that. They're like my granny - always grumbling - seeking to run down every russian act, can prove only their incompetence this way.

Alexey, Moscow,

to my understanding, discount-gas is political related. market price is politics-free. now the Russian simply wants a politics-free market price (today it is USD450, but it can be USD150 tomorrow) for its gas, why they are blamed for?

william (Chinese), london, uk

We need to take into account 2 factors also causing Russia is acting this way: (a) Ukrainian chemical plants and steel mills consuming the gaz are Russian competitors, (b) Russian domestic consumtion has increased, exploration - decreased and thats why Gazprom need to reduce export.

Yuriy, Kyiv, Ukraine

If we love and support Ukrainian Democracy so much, why we don't want to pay their bill?

David, Miami,

Unfortunately, it couldn't be treated as a weighted observation. Using vocabulary is sorted in depth. Using ascertainments are like the same. Fully one-side position.

Oleg Serebryakov, Moscow, Russia

It's very interesting and eyes-opening to watch all this western media coverage of the gas issue. What's white in color is described as black.
Who doesn't open a tap now? Ukraine. All the rest is in fact absolutely irrelevant.
I wonder who and why wants to make enemies with Russia

Andy, Moscow, Russia

Russia loses about $120 000 000 EVERY DAY because of this conflict! Do you really think it is what Putin needs?!
Russia can't afford to give discounted gas, the economic situation forces to raise prices.
Ukrainian people are also disinformed, it's a pity.

Russia need its money, NO MORE...!

Alisa, Saint-Petersburg, Russia

Britain and rest EU may get their energy resources anywhere, in Sahara, Australia, or even Moon. But if they need real gas now and not science fiction tomorrow - in their interest to solve Ukrainian gas jam as soon as possible.
So stop forcing cold war nervous moods - that isn't right way as usual!

Eugene, Saint-Petersburg, Russia

i'm so glad to listen an objective opinion about this dirty gas games in political area.we need to look for a differences between commerce&neoimperial efforts by russian leaders.

volodymyr, kyiv, UKRAINE

Surprise, surprise, Russia has not appealed to Stockholm court. And it will NEVER do.

Although Ukraine does have the obligation to transit gas at fixed PRICE, the VOLUME of transit has to be contracted separately, otherwise price contract is void.

LEGALLY Ukraine cannot be forced to transit.

Mykhaylo, Kyiv, Ukraine

Europe should switch to nuclear and use the old gas pipes as sewers. The destination should be the Kremlin.

michael c, london, uk

The best article that I've read about russian gas today. Thanks a lot!

Alexander, Odessa, Ukraine

Why they can dictate the price of what they buying, if they do not want to buy it, let them buy somewhere else, maybe they can go to Mars or Moon, maybe there is chipper then in Russia. Russia have enough natural resources to sustain itself. Can EU or Ukraine do that?

Alexandre Lebedev, Ottawa, Canada

Strange: the EU monitoring experts are already three days at gas switching centers, but mass media still prefer to appeal to rumors, hystorical parallels and emotions instead of simply looking at the result of their monitoring. Gas pumping is not a rocket science -- why not just look on devices?

Alexander, Moscow, Russia

So you're suggesting that Russia should give free gas to its neighbours so not to upset the West?
I cannot see anything political here; as soon as Ukraine pay its (heavily subsidised) bill, the dispute will end.

Alex, Zurich, Switzerland

All this gas dispute is about Ukraine demanding cheap gas from Russia, including for 'technical gas'" needed for transportation. The rest is imagination on the part of the author. Until Ukraine gets what it wants, transit to the EU will be blocked. Someone somehow will have to pay them.

Alex Chankin, Munich, Germany

Perfect article,feeling very gratefull to Rosemary. Thanks very much!

Vladimir, Zaporozhye, Ukraine

True and to the point, I would rather see all our coal mines recommissioned and burn coal than let these Russian's blackmail us!

william thomson, lincoln, u k

The author is brave, no doubt. More important - the author is correct.

Leonid, Kyiv, Ukraine

The Europe is repeating old mistakes - to avoid "disbalance of power" some states allowed Nazy Germany to annex Sudetes from Czech in 20th century. The same happened to Abkhazia just recently, but aggressor's name is defferent...

Yuriy, Kyiv,

Many thanks to you Rosemary for being brave and straight on this issue! Because Ukraine is an independent country now, the Russia's leadership just can't get over it; Your article helps readers to get real especially those biased by Kremlin propaganda, THANK YOU!

Dimitry, Kiev, Ukraine

You must fall asleep often over there. How many wake up calls do you need? You seem to be getting several a year at the current rate. Need more? Maybe the UN or the EU will do something about it...someday. Like a strongly worded letter or something.

Chris, Greenville, USA

Until 2004 Ukraine got 50 billions cubic metres of gas, for 45 $ per 1000 cubs. Now, the prise is about 450 $ per 1000 cubs. Ukraine HAS NO 25 000 000 000 $ for paing, (it has state budget around 55 billions), and only EU can pay ukranian dept. So, 'Ukraine wants to align with the West' :)

Evgen, Minsk, Belarus

The solution to energy security is nuclear power. It is the only energy source that is affordable and reliable given our population.

DanW, Hudson, OH, USA

The problem is that this is just another symptom of our greatest problem. This is that the demand for hydrocarbons is already outstripping supply. Why are our leaders ignoring the greatest threat to our way of life that there is, or has ever been.?

Andrew, Cambridge,

At last someone is being brave enough to talk about Putin's hidden agenda.Thank you Mrs. Righter

Mal Bhal, Reading,

I truly fail to see why Russia should be expected to keep supplying discounted gas to a Ukraine that doesn't want to be its friend.

Ukraine wants to align with the West - fine - but it can hardly expect to also keep its cosy deal with Russia as well.

Nick, France,

Gabriele, the post cold-war world has had many chances, the western world has ben t over backwards to involve and encourage our ex-enemies. Unfortunately what remains of the USSR has decided that it wishes to go backwards in time, all through the insistence of Putin. Invasion - see Georgia!

David Leslie, Perth, Scotland

An absolutely realistic article - and very welcome for it. The Russians cannot be trusted - they are only interested in exploiting every opportunity in order to recover their Soviet Empire.. one of these days [maybe even during the Obama inauguration] they will take a step too far.

Johnson, reading, uk

Having worked variously in the Oil & Gas, Electricity and utility sectors it is refreshing to read an article in a newspaper that is actually based on reality. The UK infrastructure is so bad it is laughable and our lack of policy and direction has been non existent for many years.

Steve, Reading,

"Mr Putin's divide-and-rule strategy" and "grand design" ... it is astonishing how deeply embedded Ms Righter still seems in the Cold War. lucky she hasn't mentioned invasion plans yet. why not open her eyes and give the post-Cold War world a chance?

Gabriele, Genoa,

God, some people are so naive. Of course Putin is a threat to us and we should not be reliant on any foreign power for our energy. Is everyone in the Netherlands so blinkered and living in fluffyland?

Graham, Driffield, UK

Dear Rosemary,
You`r keen to stay blind on the issues of last crisis. It is suitable for you to think that Russia, not UA, bears full responsibility for it. It`s understandable. But unwise. Because if you have a toothache you have to heal your teeth - not brains.
Try to see a real roots of problem.

Peter, Vladivostok, Russia

It's the 4th time since 1993 that Ukrain and Russia are blackmailing each other with their infrastructure/gas. I don't think we should mistrust either Ukrain or Russia. We should maintain good relations with both countries. Frankly, I am tired of having to read all this sensationalist cold war talk.

Barbara, Gent, Belgium

I think that strong russophobia has disrupted perception of reality of certain people. For them it is impossible to drop their stereotypes and analyze problem without bias. Just too much of intellectual effort for them. But blind blaming of Russia will not help now - problem is in other place.

Alex, Moscow, Russia

Our requirement for energy cannot be met by renewables at our latitude - fact. The ONLY feasible solution is concentrating solar power (CSP) from the Sahara dsitrubuted round Europe as High Voltage DC electricity.

Fortunately with a political will that could be complete by 2020.

Steve Sowerby, Wiltshire, UK

Listen up.
Build your big gas tankers, send them to Australia, load up with gas and get warm again.Send a steady stream of tankersd as with the steady stream of coal carriers going to China.

Gene, Sydney,

The first two comments here are indicative of why you're in this mess in the first place! Don't worry...we've got the same types over here. Thats why we sit on billions of gallons of oil and endless gas....but can't drill for it. Hey..when it gets cold...just don't let them in to your house!!

Murph, Madisonville, KY/USA

There are other external sources of gas than Russia you know, and the UK has access to them thanks to billions of pounds' worth of investment in import infrastructure that you don't seem to have noticed..

MegaWatt, London,

Putin's approach has seemed transparent to me in Australia, I'm amazed that it has to be spelt out to UK readers. Time for EU pollies to remove the u from supine and get some backbone.

Faustino, Brisbane (ex-pat), Australia

I'd be happy if the gas relations between Ukraine and Russia would cease to exist altogether. Please, let Gazprom continue the Nord/South stream and let us support Ukrain in their rebuilding an economy that does not rely on the gas that comes from a nation with which it has a troubled relationship.

Barbara, Gent, Belgium

Since President (sorry "Prime Minister", or "ex-KGB agent") Putin can order a so-called commercial company (Gazprom) to turn off supplies, this company is clearly under State control.
This should be borne in mind during talks on the USSR (sorry, Russia) joining the WTO (World Trade Organisation)

Chris, Paphos,

That cliche of KGB is equally applicable to Bush dad as director of CIA

J.Rijntjes, Lelystad, Netherlands

Rosemary
The NEOCONS are a completely busted brand so why keep on pandering their warmongering worldview?
Are the main stream media so cowered?

J.Rijntjes, Lelystad, Netherlands

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Rosemary Righter

Rosemary Righter

Rosemary Righter has worked for the Far Eastern Economic Review and Newsweek in Asia, as development and diplomatic correspondent of The Sunday Times and as chief leader writer at The Times, where she is now an associate editor. She has written four books, including a history of the United Nations

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