The Shadowy Game of Natural Gas

Russia is again threatening to cut off natural gas supplies to Ukraine. It says the reason is accumulated debt on the part of its neighbor. Gazprom, the Kremlin’s stalking horse, says Tuesday morning is the deadline – pay $1.5 billion, or lose a quarter of your supply. Talks are supposed to be going on in Moscow.

No one is opening up his accounting books, so we don’t know the true state of affairs on the two countries’ balance sheet. But there are enough dribs and drabs to get a picture of what’s at least partly going on.

This partial answer is Rosurkenergo. An entirely opaque go-between company – half-owned by Gazprom, and the other half by Ukrainian businessmen – Rosurkenergo buys natural gas from Turkmenistan sells it on to Ukraine.

Ukraine says it will pay off whatever debt it owes if the deal with Rosurkenergo is severed. But last week, a Gazprom official named Ilya Kochevrin told the Financial Times that, if that happens, Ukraine should expect a steep hike in its bill.

That line is probably not straight out of Mario Puzo, but it could be. One might rationally ask why a joint Gazprom-Ukrainian company is more capable of negotiating cheap gas than Gazprom and Ukraine directly.

One thing to note is that it has seemed that the Kremlin is attempting to get a lot of its financial house in order before the ascension of Dmitri Medvedev to the Russian presidency in next month’s elections.

Vladimir Putin, for example, has been peripatetic in his efforts to get Gazprom's pipeline deals with Central Asia and Europe sealed fast.

It’s also been a principal suspicion in the recent arrest of Russian mobster Semyon Mogilevich, an internationally hunted fugitive who lived for years in plain sight in Moscow before Russian authorities miraculously charged him last month with tax evasion. Mogilevich has been linked as a possible shareholder in Rosurkenergo, which if true could mean that his arrest was related to the company, and how and with whom the proceeds are shared.

This is all Kreminology. At the intersection of commerce, crime and geopolitics, such questions in the end get resolved. But what of the collateral victims, such as Europe? Gazprom claims this is just between Russia and Ukraine, and has assured Europe – which receives 80% of its Russian gas through Ukraine – that its supply won’t be affected.

Does anyone really believe that Ukraine won’t pass on the crunch to Europe in order to build up leverage?

Photo: dbking
Rights: Creative Commons

How to Tarnish A Hard-Won Reputation

It's not a household name in the United States, but in the former Soviet Union the Organization for Security and Cooperation in Europe is a source both of irritation and solace. The distinction depends on whether you are one of the region's autocrats or one of its independent thinkers.

Whichever the case, the OSCE -- financed in large part by the U.S. -- has played a hard-fought, 16-year role as Europe's official conscience.

Until now. The OSCE has bafflingly jeopardized its reputation as Europe's premier human rights watchdog in order to satisfy an understandable if misguided campaign by Kazakhstan for the prized chair of the organization.

Last Friday, the OSCE for publicly unknown reasons succumbed to Kazakhstan's full-court press on the issue, and announced that the Central Asian republic will take over the one-year chair a little over two years from now, in 2010.

Kazakhstan is hardly the region's worst human-rights violator. But neither is its record worthy of holding up as an example, which is what the chair represents. This is a country that has never held a fair election; although President Nursultan Nazarbayev has led the country since 1989, there's no way to know for sure that he actually ever won a contested election.

Nazarbayev has never permitted a genuine opponent to run against him, and like his neighbor to the north, Vladimir Putin, he has routinely beefed up the election results to show swelled support. He recently signed a law allowing him to serve as president for life. And there's no evidence that, short of his own death, Nazarbayev will ever agree to give up the post; to the contrary, the probability is that he'll stay on the job for years to come.

If the OSCE states wished an example from the former Soviet Union, why not choose Ukraine? For all its flaws, it has been holding truly competitive presidential elections for some 13 years. Or better yet, how about Georgia? There, Mikheil Saakashvili has actually stepped down from the presidency in order to run in a snap election next month.

Kazakhstan ran its OSCE campaign through its own offices and the paid help of lobbying groups like APCO in Washington. It's not clear to me what precisely turned the tide, but the OSCE decision is appalling, in my opinion. It will be hard-pressed to recover its reputation.