Investor's Business Daily (USA): "Russia's Putin Shows His True Colors"
Russia signed off on a new agreement for fuel deliveries to Europe, resolving its gas cutoff crisis with Ukraine. But much of what it did this weekend should warn Europe it's time to look for another supplier.
Until Monday, Russia's case against Ukraine looked credible. The latter was a $1.5 billion deadbeat, refused to pay its $600 million in contractual fines, overconfidently insisted on reduced rates in new contracts, and may have been siphoning Russian gas from its pipelines that it was contractually obliged to pay for. There's little doubt Ukraine's actions hurt Gazprom, the Russian energy giant, which was in bad fiscal shape and needed income from reliable customers downstream who paid retail.
What's more, Gazprom didn't appear to have political motives in demanding Ukraine payment - it was trying to boost gas deliveries to Europe through the Ukrainian pipeline to meet its obligations.
Elsewhere, Gazprom was delivering gas to Georgia, a nation Russia made war on last year, because its bills were paid. Conversely, it also nearly cut off Belarus in 2007, another deadbeat, even though it was Russia's cozy ally. (Crisis was averted when Venezuela's Hugo Chavez paid the $500 million bill.)
But the political outlines of the Kremlin's gas game began to show up over the weekend. The European Union brokered a swift deal to install gas monitors to get Europe's gas flowing.
Instead of getting that going as fast as possible, Russia started finding legal technicalities in the pact that delayed resumption of gas.
First, Prime Minister Vladimir Putin said there'd be no gas until Russia got an official copy of the deal it had signed.
Another delay came when Ukraine's leaders foolishly scribbled into the margins of the agreement that they had already paid their bill, an unauthorized addition that whatever else it was, wouldn't have been recognized in any court as binding. But it left Europe to freeze another day, until the contract could be redone.
With it signed, Prime Minister Vladimir Putin (and not President Dmitri Medvedev, who was distancing himself from Putin) could claim victory and reassert that Russia is a reliable energy supplier.
It didn't take long for Putin to reveal his hand. He let on that what he really wanted was actual control of Ukraine's pipelines.
Out of the blue, he dredged up an old proposal about how Ukraine could "privatize," with Putin buying the pipelines. While privatization is not a bad idea, coming from the leader who effectively nationalized Russia's energy and was now letting Europe freeze, it suggested a power grab. "Ukraine regards its gas pipelines as a fetish and a national treasure provided by Lord," Putin told German television network ARD, trying to make Ukraine look irrational.
Obviously, he was trying to discredit Ukraine to Germany, the European nation he's closest to, perhaps to set the stage for some sort of regime change.
It ought to be unmasked for the manipulation it is. How do we know? Well, the most significant sign of Putin using energy as a weapon came in the size of loss Gazprom reported as Putin delayed a deal on technicalities: $800 million, or, as Novosti reported, $120 million a day. That amount exceeds the $600 million Russia says Ukraine owes in fines.
No credible business would let losses like that pile up just to collect a far smaller amount from Ukraine. A petrotyrant, however, would, because it's less about getting paid than getting even.
For Europe, this is important to understand.
Europe needs a reliable energy supplier. Russia has shown it has other priorities. That raises the case for diversifying suppliers away from Russia and moving to alternative sources.
Instead of investing in new Russian pipelines, such as the North and South streams currently on the table, Europe should give serious thought to Algeria and Turkey as alternative gas suppliers.
Other natural gas pipelines from the Mideast may warrant a second look. Liquified natural gas terminals will make gas accessible from places other than Russia and also deserve investment. And finally, the development of other fuels, like nuclear energy and coal that will lessen Europe's dependency on just one tyrannically inclined supplier.
These shifts are urgent matters for Europe, because so much is at stake. Without something as basic as a reliable energy supply, Europe will lose more in output and investment than Ukraine's fine.
Ultimately, that will hit America's economy, too.
If there's anything to be learned, it's that Russia will use gas as a political weapon to settle old scores. Even if its best customers are left in the cold.
