Last year’s Orange Revolution in Ukraine squeezed much of the goodwill out of bilateral relations. The pro-Western administration in Kiev now suspectsRussia is using the gas issue to destabilise it ahead of elections. Moscow retorts that if Kiev wants to join the EU and build a market economy, it should pay market prices for its gas.
And it seems other ex-Soviet states that have embraced the European Union and NATO will soon be feeling the pinch. One member of the Russian parliament recently asked: “Is the government planning to reconsider pricing for other neighbouring countries such as the Baltics, Georgia and Moldova ?” “Yes,” came the reply from the energy minister. Ukraine has what many say is a bargain deal, paying 50 dollars for every 1000 cubic metres of gas in return for letting Russian supplies transit through its territory to Western markets. Moscow wants to increase the price to 230 dollars. By contrast, Belarus is set to continue paying 47 dollars. One prominent Ukrainian academic said: “Of course there’s a political dimension to this. Countries which have defied the Kremlin face higher prices.” Hikes in costs would have a serious impact on the economies of ex-Soviet states, especially on the more vulnerable sections of society such as pensioners. But politically that may not matter very much in Moscow once the Northern European gas pipeline is completed, bypassing Ukraine as it delivers supplies from Russia to Western Europe. Ukraine’s President Viktor Yushchenko has in effect said that his line on the naval base will depend on Russia’s line on gas prices. Arguably Russia also gets a bargain deal on the Sevastopol lease, paying 98 million dollars a year. Kiev is threatening to raise this to two and a half billion dollars. That could undermine Moscow’s strategic influence, as the port provides a crucial outlet to the Black Sea and, through the Bosphorus straits, to the Mediterranean and beyond.