The Gas Crisis and the Ukrainian Election
I make the case that it won't ultimately help Yanukovych
The gas conflict with Russia continues to broil on. Now the winter break is here and, as the situation stands, Ukrainians could be looking forward to having their gas cut off this New Year's. Which would be a very bad sign to all those out there who believe the old Ukrainian superstition that the way you begin a year is the way the whole year will progress.
Tymoshenko has weighed in now to say that, in the likely event that the government does not reach an agreement with Russia by January 1, the Cabinet should resign. This is some pretty mean-spirited political positioning ahead of the March election, and I am disappointed to see Tymoshenko using it (as Zerkalo Nedeli was before me). I seem to recall her playing a major role in fomenting a gas conflict in July. Then she was the populist PM working for Ukrainian voters by trying to impose price caps on evil Russian businesses trying to charge Ukraine "unfair" prices. Yushchenko had to come in then and rebuked her for her obviously economically-unsound policy. He then put the prices back at market levels and the problem went away.
Now that she's in the opposition, though, it is not the Russian government's but the Ukrainian government's fault that prices are going up. For shame!
Grinding On
Zerkalo Nedeli recently came out with a great analysis of this situation, translated into English (including a criticism of Tymoshenko). I like how they dish out the blame to all participants.
To Russia:
It is naive to think that Russia’s move is aimed exclusively at patching the hole in its coffers. Vice Prime Minister of Defense Sergey Ivanov said, “In my opinion, sometimes we don’t formulate our policy in relation to different CIS countries clearly enough. And we act too irresolutely when it comes to our economic influence on those countries’ attitudes to Russia.” According to ZN’s information, Lavrov promised at a closed-door session of the Duma to employ “all available means of economic pressure” on the “disobedient” neighbors. Natural gas and oil, which the Kremlin justly views on par with nuclear arms, is supposed to be the main diplomatic means.
To Yushchenko:
Now, where is Yushchenko’s party Our Ukraine? Why is it still silent? Are the national democratic forces following their leader’s advice “not to politicize the negotiating process?” That is a very good screen for certain “friends” of his, who make money on shady deals with Russian businessmen. The gas deadlock is also another opportunity for them to “drown” Tymoshenko. The impending doom does not seem to worry them much.
To Tymoshenko:
Roman Bezsmertniy, campaign chief of staff for Yushchenko’s election bloc, says that Tymoshenko’s demand to sack the government unless it signs a contract with Russian natural gas suppliers by January 1 is a stab in the back. He is absolutely right and his patriotic statement demonstrates very clearly which Tymoshenko is more concerned about: her problems with Russian prosecutors or her country’s national security.
To Yanukovych:
The Party of Regions demonstrates utter near-sightedness. Supposing Ukraine fails in the negotiations and the price for Russian natural gas goes up fivefold. This defeat may be fatal for Yushchenko: the critical mass of his errors will drag his team to the bottom in the parliamentary race. Subsequently, Yanukovych and Akhmetov will win, securing a majority in the future parliament, which entitles them to form a government. But the economic impact from the gas price rise will crush their government in a mere six months. Besides, the Party of Regions represents the interests of big financial-industrial groups and its electorate is concentrated in the heavily industrialized regions of the country, which will suffer from these price hikes more than others. In view of such prospects, it would be logical to help the government stand its ground in negotiations with Russia. It is in their interests to secure the terms of the new gas supply contract, under which their chemical and metallurgical plants would profit. But do they move a finger? No. Obsessed by their mania for power, they are ready to victimize thousands of people employed at their factories, not to mention the entire country.
Blame dished out to all, and fairly, I might add.
Guessing About the Public Opinion Response
I haven't gotten any really good public opinion numbers yet. I'm very curious to see whether or not the strong-arm tactics by Russia will work. Will Ukrainians respond more sympathetically to the Russia government's argument (that this is a purely economic move, and that the Ukrainian government is being obstructionist) or to the Ukrainian government's argument (that the Russian government has hiked the price unreasonably quickly, and this is part of an attempt to damage Ukrainian politicians it doesn't like ahead of the Ukrainian election).
ZN seems to think Ukrainians might side with the Russian government, or they would not have worded their condemnation of Yanukovych in that way. Even so, I'm going to go out on a limb and predict that pro-Russian candidates (Regions of Ukraine and the Communists) will do less well with the oil crisis than they would have done without.
Of course they're still going to have a good showing, even in the rerun in 2004 Yanu got 40%, but this escalation of antagonism won't help. Please hold me to this prediction, I will try to make reference to it after the election is over.
Why do I think this confilct will turn Ukrainian opinion against Russia? Four reasons:
- When was the last time threats of dire economic reprisals from Russia began circulating? During the Orange Revolution. It didn't work then.
- Yushchenko's popularity, and that of his party, has fallen precipitously since the last election, but if there's one thing that revives the popularity of a politician, it's a threat from outside. I just can't believe that, should Russian Gazprom flick the switch on the nation in the middle of New Year's celebrations, Ukrainians will ultimately feel sympathetic to Gazprom's reasoning.
- Tied in with the last point, I think the rising antagonism from Russian citizens towards Ukraine (they very clearly see this problem as Ukraine's doing) will not help gain Ukrainian support. It will be easier for Ukrainian citizens to feel confrontational and antagonistic if they think Russians are behaving similarly, and this budding antagonism will partly displace their frustration with their own government.
- Tymoshenko got herself a little ratings boost with her blatantly anti-market attempts to fix low oil prices in July. Ukrainians, as with voters in much of the world, are not particularly altruistic about supporting solid free-market economic policy that hurts their interests (for the most part, the price hike proposed by Gazprom would bring prices charged to Ukraine up even with those charged to Western Europe, not single Ukraine out for unusually high prices).
Ultimately, above any of the previous items, I think Ukraine will respond negatively to Russia as a result of this crisis because the Russian government has underestimated the strength of national identity in Ukraine. I am especially confirmed in this belief because many commentators have underestimate Ukrainian national ideantity, and I am one of them. I underestimated Ukraine just before the Orange Revolution. I came back from observing the election with the OSCE with my wife, and we both thought that the nation would just muddle along. Instead, Ukrainians showed us an amazing amount of dedication to their nation and democratic principles. I'd never heard such nationalism under Kuchma, just like I'd never heard the national anthem sung with such enthusiasm.
That is why I expect that the strength of Ukrainian affiliation to national identity will prompt them to take the side of their own government (despite their misgivings) rather than take the side of a foreign nation against their own.

Reader Comments (39)
Are you familiar with the works of John Reed on Russian Revolution? He too was a clueless Westerner, albeit he actually (mis)reported on an actual revolution, as opposed to a rock concert staged on behalf of oligarchs.
Your prediction rests on dogmatic assumption that Ukrainians can't distinguish economics from politics i.e. that at Maidan they made an existential choice to go West and that any economic impediment along the way will only strengthen their resolve. Which is fine theory considering that you can’t read Ukrainian or Russian, which precludes you from tuning in to the public discourse on television and, more importantly, the Internet. Let me help you out by transcribing the sentiment: One year after the Orange Project has revealed itself as an economic dead end – everybody understands this now, even the most rabid of Petlyurovci. It was a PR stunt to drag Ukraine out of Russian sphere of influence and into NATO at the expense of national interest and economy. Without Russia, Ukraine cannot survive period and the worsening situation is a prelude to things to come.
Here is a heads up of what’s going to happen in the coming months: Russia will cut off the Ukrainian share, Yushenko will start digging into European share, EU will be up in arms, Yushenko will point the finger at Putin, Gazprom will turn off the gas completely, and from there on in we can all wait for Yushenko to get impeached, unless US prints some dollars and comes to the rescue.
I wish you a Merry Christmas and to your Orange idols - a crushing defeat in Parliamentary elections.
In fairnes, Dan's wife is Ukrainian.
It's clear that Dan has a set biases as we all do to one degree or another.
Some of us are more objective than others.
I sympathize with your view.
Over dinner last night, a Russian official (whose in laws have family roots in Ukraine), noted that there's official Ukraine (Yushchenko) and then there're the views of Ukraine on the whole.
The Brzezinskiites got a cheap thrill a year ago. I was on record back then for saying that their vision wouldn't succeed in the long run.
...And Yushenko's wife used to work for US State Department. The rabbit hole only gets deeper if we involve everyone’s spouses in this J
To be honest, language isn’t really a problem, not it Dan’s case anyway. His is a pathological case of a demagogue: flying blind on ideology against history, economics, and geopolitics. Don’t get me wrong – I do not for a moment suspect him of cynicism: Dan sincerely believes in human rights, free market economy, and Polish/Zbig’s peace activism. It would all be pleasantly amusing if it weren’t so pernicious. His current bet/hope is that Ukrainians will come to hate Russians for killing their free market economy by selling them gas at free market prices i.e. inter-ethnic strife between a people of single faith and history. Meanwhile in the background, Kosovization of Crimea by TurkoTartars has already occurred and the gaz war will only exacerbate the Balkanization of the entire region. Will Dan stroke Islamist nationalism with his cheers? He should. But I doubt it since the gaz war has already undermined his consistency as a free market liberal.
My prediction: civil war and corpses – that’s the real price of Orange Revolution. For Dan, its good thing that has nothing at stake except his blog.
My own spin is that he has been brought up on some very faulty notions which I've ddiscussed at this impressively designed site.
Yushchenko's wife being an American isn't an issue. Her involvement with the neo-Nazi Captive Nations Committee and some of her comments from the 19 eighties are a point of concern.
As per Crimea, the Russian and Ukrainian citizenry of that region are generally united against the post Soviet activism periodically initiated there by west Ukrainian nationalists.
For practicality reasons, all will eventually work itself out in a peaceful manner. Russians and Ukrainians aren't Serbs and Croats.
Hmmm. I am not familiar with her statements, nor do I pay attention to accusations of neo-Nazism for the same reasons I don't pay attention to accusations of anti-Semitism; its the most cliche form of slander.
Youre absolutely right about RussoUkrainian relations - there is absolutely no cause for enmity, which explains why Yushenko's ratings drop as he ratchets up support for the ethnic card.
With Crimea - the problem is not of Western Petlyurovci but Crimean Turks - and thats a completely different political animal.
Some are neo-Nazi and-or for that matter anti-Jewish as well.
Her previous comments when she headed that org. definitely fall under the category of neo-Nazi as per some pretty blatant anti-Russoism.
Regarding Crimea, anti-Russian west Ukrainian nationalists have periodically gone to that region to stir up passions. The rhetoric of these nationalists takes the side of the Tatars. The motive is the same as their sympathy with Chechen separatists; the latter of whom are losing their war (thank G-d).
That's an interesting bit of info; nationalists regard their borders as sacred, but then again, supporting a Crimean Caliphate on Leninist national self determination grounds is perfectly consistent, especially when there greater players involved, eager to throw some wood into the fire. Crimea's legal status is rather arbitrary and Ukraine's condition or, to be more precise, weakness makes Crimea a ripe ground for foreign intervention.
P.S. This week, the Black Sea fleet has been mobilized. We are all very anxious for Jan 1. Slovakiya will have a very cold New Years.
I completely agree with the new NGO law, although I was disappointed to see Putin cave in and take out certain re-registration requirements. Note: the pressure was applied by US Senate, NGOs, and a few 'usual' libs. For all the smear that he is getting as a 'control freak', Putin is a weak leader unable to affect the suicidal trends of the nation. Want to see a real leader? Look to Belarus.
Dan, correct if I'm wrong but aren't high gas-prices in W. Europe due to taxes on oil? As such, I don't think one can say letting the Russian oil prices rise to that level is truly a matter of "free markets".
Free markets are not an easy thing to define in the first place, there are always rules that affect the structure and performance of markets. This is particularly true in oil where market-power and gov't/corporation ties are pervasive in all countries.
I join you in believing that the memory of the community and love of neighbor during the OR will enable Ukraine to weather the storm threatened by Russia.
Merry Christmas!
dlw
Get your terms straight - the question is of gas, not oil.
Free market prices for gas are determined by calculating alternative energy sources - in case of Germany for example that would be coal and oil. At 230 USD per thousand cubic meters, Ukraine is getting the same price as other free market economies - all free and fair just like everyone wanted. Plus Ukraine gets to charge transit charges for the rest of Europe.
You're right about elusive nature of a free market pricing. Renegotiating gas contracts every year under the table is not what I would call a free market, but that is one of the rules of the game that Yeltsin and Kravchuk signed their respective countries to - every year the two sides come together and negotiate the price of the market for the upcoming year. But that still begs the question of why should Ukraine under the current Orange regime get preferential treatment from Germany? Especially when it appears that the Orange regime has money to flunk down the NATO drain?
Better yet, why should Russia have to subsidize Ukrainian backstabbing?
Gazprom offered multiple solutions to the problem including: lowering of transit tariff, lowering Sevastopol rental, allowing Russian companies to participate in (re)privatization of Ukrainian industry. In turn, all they got was insults. So if you want to look for culprits in this, dig elsewhere.
Hox! Hox! Hox!
This is where we respectfully (I hope) have some differences.
I concur with you that it's absurd to call Belarus "the North Korea of Europe." Just look at Milo Djukanovic in Montenegro (only he gets along well with Soros and has paid Janusz Bugajski to be his lobbyist).
Then there's Saakashvili and Aliev, who aren't so much more democratically inclined (if at all) than Lukashenko.
I admire Lukashenko. A quick glance at the trade balance would justify bestowing upon Belarus the title of 'little China' - immense industrial potential, low unemployment, universal health care, stable pensions, low crime rate/corruption, gas priced at 46 USD per 1000 cubic meteres, and a friendly investment environment - all in a poor country devoid of natural resources or access to sea.
One may say that Lukashenko squeezed the full potential out of the old regime and has demonstrated an alternative outcome to the Cold War - Belarus is what USSR could have become. All that one had to do was NOT allow Party apparatchiks to privatize i.e. steal and embrace free trade.
To survive the informational warfare, Belarus needs is a stable ideology; Lukashenko has publicly declared two models worthy of imitation - China and Israel.
He is in good standing with the Orthodox Church, and he understands that only Christianity can save his country from a demographic suicide. If he can create a body like Iran's Council of Guardians, Belarus will be the only state in position to become 'the New Jerusalem'. As his liberal and multicultural European neighbors die out - with Ukraine leading the way - Lukashenko can reverse the End of History, just like he reversed the collapse of USSR in BSSR.
Christians are the only ones without a state. They deserve a nation where they can save their Souls. That why I will pray for God to steer him in the right direction.
If you want democracy, Orange Ukraine with its proud mail-order-bride industry is right next door - just bring some matches along, it may be a cold winter.
Out of respect to Dan's desire of seeking to keep this site in a Ukraine focused direction, I invite all here to participate in this forum:
LYING ABOUT RUSSIA
http://talk.guardian.co.uk/WebX?14@210.fdHLizxAdau.20@.77480649/950
Sign up is free and you can post under any name. It's the most free form of all talk venues in terms of not having an overbearing monitor say what can and can't be said.
I welcome Dan to come on since he doesn't accept my general views on Russian media.
Toynbee, there's no need to get personal with the orange folk. Thru calmly thought out points, reason can prevail. I sense that Dan hasn't fully digested the scope of views running opposite to his own.
My old man taught me to always understand the "other side," as a means of better understanding your own views. Unfortunately, some knowingly don't do this because it conflicts with their own wrong headed views which survive on a one side only principle.
Anders Aslund very much typifies this kind of intellectual dishonesty.
Aslund is a useless quack. I enjoy his mispredictions. Same with Leon Aron; they deserve one another.
Is there at least one respectable Russian relations think tanker out there? No. They are all dinosaurs left over from 1989. With Ms. Rice in the State Department, moderates like Anatol Lieven stand no chance.
Belarus is very much a subject of this because Belarus and Ukraine are two political options, nay, solutions to the same problem.
Leon Aron isn't so bad.
Thank you for the invitation but I do not think I can contribute anything to the thread: It seems like a collection of links and all my sources are very Russian and very Orthodox i.e. disenfranchized imperialists.
Besides, arguments for a parliamentary theocracy a la Belarus do not fly well in American circles.
And you think this to be a better venue for such advocacy?
Try it on for size.
A couple of Russia based Anglo-Americans periodically appear there along with a Lukashenko bashing Pole.
I am only interested in a debate; if I wanted advocacy, I would have made a blog along time ago.
I will definitely monitor that thread - its a good update on current antiRussian ideology.
So you're a boxer eh?
Good for you as I share this spirit.
http://www.washingtonpost.com/wp-dyn/content/article/2005/12/23/AR2005122301402.html
The label free-market does not in anyway deserve to be applied to gas/oil markets. "free market prices", as you use them, better are labelled as "opportunity cost" prices.
I'm still wondering, do high prices in Europe reflect taxation? I know that oil/gasoline prices are higher in Europe because of import taxes.
dlw