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FrontPageMagazine: RUSSIA USES ENERGY TO SPREAD TENTACLES

By Ed Morrissey

The state-owned Russian energy corporation Gazprom succeeded in its quest to capture a half-interest in the pipeline through Belarus as well as getting the price hikes it wanted from the former Soviet republic. As Der Spiegel notes, this latest power play by Vladimir Putin puts Europe in a difficult position:

Natural resources juggernaut Gazprom has scored yet another victory in its gas pricing war, gaining 50 percent of the Belarusian pipeline network. The deal demonstrates Gazprom’s ruthlessness in securing power over neighboring former Soviet satellite states and raises questions about how reliable the Russian company is as an energy supplier to western Europe.

It was deja vu all over again. Just as Moscow twisted the valve on the pipeline carrying natural gas from Russia to Ukraine one year ago, it threatened to cut off supplies to Belarus on New Year’s Day. In the end, however, Minsk averted disaster by agreeing to double the bargain price it pays for natural gas from Kremlin-controlled Gazprom. Now, Belarus will pay $100 per 1,000 cubic meters of gas — still far cheaper than the price of $290 typically paid in Western Europe.

The tangle in Minsk highlights Belarus’s energy dependence on neighboring Russia. A sudden halt to cheap gas from Gazprom would deal a crippling blow to the country’s economy.

It wouldn’t cripple Belarus alone. The Russians now control all of the pipelines up to the borders of the West, and it might not be long before Gazprom comes knocking on European doors to demand the same kind of ownership stake there. If the Europeans balk, they can expect at least the same level of toughness from Putin as he showed his supposed friends in Belarus.

Belarus got a worse deal than DS reports. They got $5 less per cubic feet than the Russians demanded, but it’s a temporary victory. They had to agree to a series of price hikes over the next two years that will eventually quadruple what they pay for energy now, the supposed “friend prices” that Belarus has enjoyed by remaining within the Russian sphere of influence. That kind of increase will cripple the Belarussian economy, making them more dependent on Russia for aid — which they will not get from the West as long as Alexander Lukashenko remains as dictator.

Putin cares about more than just the energy prices he can squeeze from Minsk or other points further west. He wants it clearly understood that Western energy supplies come from his personal good graces — and that he has no problem threatening to cut off those supplies if not kept very happy. That will weigh heavily on European resolve in the coming days when dealing with Russian positions on Iran, as well as their relations with West-leaning Ukraine and any thoughts of NATO expansion into the former Soviet republics.

Putin’s consolidation of the Russian energy sector was no accident. The West, especially Europe, is about to get the bill. Once again, we see that energy independence for the West has strategic implications, not just economic implications, and it behooves us to start developing it as soon as possible.

Interestingly, only the New York Times editorial board seems to see the issues here:

There was no global outcry this time. President Aleksandr Lukashenko, the utterly Soviet boss of Belarus, has no friends in the West. But this latest squeeze is another warning that the Kremlin will let nothing — personal loyalty, contracts, the law — halt its drive to reimpose state control on Russia’s energy sector. It is also another reminder that the West, a big consumer of Russian energy, remains vulnerable to President Vladimir Putin’s whims.

The Belarus deal came less than two weeks after Royal Dutch Shell gave in to the Kremlin’s pressure and sold a controlling share in the Sakhalin-2 oil and gas project to Gazprom, Russia’s state gas monopoly. Moscow is now leaning on the British-Russian joint venture, TNK-BP, to give Gazprom a large and possibly controlling stake.
Their proposals for Europe make sense, too. The EU needs to start negotiating with Gazprom as a bloc instead of as individual states that Putin can play off one another. The EU and the US both need to send another message to Putin that the G-8 can shortly revert to the G-7 and the aid spigot can close as quickly as we see fit. The real key, however, remains finding alternate sources of energy that will leave the Russian monopoly empty-handed.  Wednesday, January 3, 2007

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