Paul Robinson

Putin plays the market

Paul Robinson says that Russia was only doing what the EU had demanded when it increased its gas prices this week

I don’t believe that I can be alone in having spent a Russian or Ukrainian winter with the windows of my room wide open. Many buildings in that part of the world are dreadfully overheated, for the simple reason that energy is so cheap. Soon, however, Ukrainians will have to learn to close their windows. Until this week, the Russian gas company Gazprom charged Ukrainian consumers $50 for every 1,000 cubic metres of gas they used. On Sunday Gazprom demanded that they pay $230. The Ukrainians’ first response was to refuse, and the Russians turned off the gas. The choice, it seemed, was expensive fuel, or no fuel at all. On Wednesday, the Ukraine agreed to pay $95 per 1,000 cubic metres for a mixture of Gazprom supply and cheaper gas from Central Asia. Gazprom has, for the moment, said it is satisfied.

What’s going on? With the collapse of Soviet military and economic might, Russia was left with very few means with which to influence the world around it. Now rising energy prices have handed Moscow a new weapon. Russia has 30 per cent of the world’s natural gas deposits and 10 per cent of the world’s oil. Oil and gas production in the rest of Europe is declining, and within a few years the European Union will import about half of all its gas from Russia. This gives Russia great leverage over its neighbours, and the Russian president Vladimir Putin is showing clear willingness to use that leverage.

We Brits love an underdog. As Robert Baden-Powell harrumphed in his classic Scouting for Boys, ‘If you see a big bully going for a small weak boy, you stop him because it is not “fair play”.’ Gazprom’s price hike provoked great howls of indignation in some circles of the British press, particularly as Russia has this week taken over the rotating chairmanship of the G8, and the issue will certainly embarrass Western leaders.

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