Russia: Gazprom's Message To Kyiv Backfires In Europe

European Commission spokesman Johannes Laitenberger told reporters simply that it was a problem for Moscow and Kyiv to work out.

"At this point in time, the commission urges the parties to the dispute to get back to the table of negotiation. The best possible solution would, of course, be for the parties to the dispute to solve the conflict between themselves," Laitenberger said.

A change of tone from the past two days, when EU countries were reporting with mounting alarm that Russian gas deliveries were shrinking -- sometimes dramatically.

Backlash

Russia's state-controlled Gazprom monopoly made no apologies in announcing on 1 January its decision to scale back natural-gas shipments to Ukraine after the two countries failed to resolve a price dispute.

But Gazprom may not have anticipated the angry backlash from Europe when shortfalls were reported everywhere from Slovakia and Poland to Germany and France.

Nor may it have expected that Europe would blame Moscow as much as Kyiv for the dropoff.

Julian Lee, a senior energy analyst with the Center for Global Energy Studies in London, says the Gazprom cutoff could have been a serious miscalculation.

"I think it's entirely possible that the Russians underestimated the response that would come from European consumers," Lee says. "It's also possible that the decision to cut exports was made perhaps by Gazprom itself without sufficient reference to the Foreign Ministry or other bodies of power within the Russian government."

Moscow continues to use tough rhetoric with Kyiv.

It has accused Ukraine of illegally siphoning off $25 million worth of gas bound for Europe on 1 January. It is demanding, as before, that Kyiv accepts a fourfold price hike in line with global market rates.

Talks between Russian and Ukrainian officials will continue today.

Russia And The EU

Moscow may yet win its dispute with Kyiv, which has angered Russia with its westward-leaning tendencies. But has it lost on another front -- its relations with the European Union?

The 1 January gas cutoff coincided with Russia's ascent to the chairmanship of the Group of Eight major industrialized nations. Many considered it a rich opportunity for Russia to present itself as a stable provider for the world's energy needs.

The past two days, however, may suddenly have Europe reconsidering its reliance on Russian gas.

Lee says Europe may depend on Russia for one-quarter of its gas supplies, but Russia also depends on Europe as a critical export market. He says the supply interruption may remind some European policymakers that oil and gas can always be found elsewhere.

"Europe is a continent that is surrounded by gas producers -- not just in Russia and some of the Caspian states of the former Soviet Union, but also in the North Sea and in North Africa. Russia has a very expensive network of pipelines that were built to carry its gas into Europe. It has at the moment no pipelines to carry its gas anywhere else,"  Lee says.

Energy Diversification

EU officials meet tomorrow in Brussels for an emergency session in response to the gas crisis.

In particular, Central European EU states like Hungary, Austria, and the Czech Republic, are expected to discuss what they see as the urgent need for diversification of gas supplies. Slovakia receives 100 percent of its gas supplies from Russia via Ukrainian pipelines; Bulgaria 94 percent, and Poland 60 percent.

Western European countries will likewise be exploring energy alternatives. It's a step that may deal a blow to Russia's dreams of solidifying its standing with lucrative energy markets in the West.

Moscow has repeatedly denied that its price dispute with Kyiv was politically motivated.

But some observers say it is difficult for Russia to argue that it is ready to serve as a politically neutral energy supplier at a time when it proved so inflexible in negotiating a price settlement with its post-Soviet neighbor Ukraine -- or Moldova, another westward-looking former republic who also faces a cutoff for refusing to accept a price hike.

Katynka Barysch,a chief economist of the Center for European Reform in London, says Russia can't have it both ways: "Now [Russia] cannot on the one hand say it wants to make a big contribution to global energy security and at the same time then use energy supplies as a political trump card. The European Union is in no position to tell Russia how much it should charge its neighbors for gas supplies. But because Russia made such a blatant demand on Ukraine overnight, it's very clear that there must be more than an economic rationale to this, and that has hugely damaged Russia's reputation at a time when the country wants to show that it is a reliable supplier."

Without political harmony with its fellow ex-Soviet republics, Russia will need to find other ways to gain control of the pipeline systems running through its neighbors. That would help avoid future political embarrassment when bilateral disputes have wider consequences.

Gazprom recently secured an agreement with Moscow-ally Belarus to share control of its pipeline system, and it is pressuring both Ukraine and Georgia for similar agreements.

In the long term, Gazprom can look ahead to projects like the Baltic Sea pipeline, which will deliver a steady stream of gas directly to Germany without crossing a single potentially troublesome transit country.