[Mb-civic] An Explosive Gas Deal - Jackson Diehl - Washington Post Op-Ed

[William Swiggard]

An Explosive Gas Deal
Putin's Hard Bargain Could Undermine Democracy in Europe

By Jackson Diehl
Monday, February 27, 2006; A15

Sometimes the stumbling blocks in international affairs are glaringly 
obvious -- such as the victory of Islamic fundamentalists in Palestinian 
elections, which has at least temporarily paralyzed the Bush 
administration's policy of promoting democracy in the Middle East. 
Sometimes, though, they are complicated, confusing or simply opaque, and 
thus barely reported on by the press or understood beyond a small circle 
of experts.

That might explain why there has been so little discussion in Washington 
of a gas deal between Russia and Ukraine this winter that, in its own 
way, may be as significant as the Palestinian vote. Here is a terribly 
dense tangle of a half-dozen contracts that involves hidden partners, 
disputed pricing arrangements, and esoteric side agreements about 
transit fees and storage facilities. It is mind-numbingly boring -- and 
it may tip the balance against democracy in much of the eastern half of 
Europe.

The story surfaced briefly at the beginning of January, when Russian 
President Vladimir Putin made the mistake of partially halting gas 
deliveries to Ukraine -- and to much of Western Europe, which receives 
Russian supplies through a Ukrainian pipeline. Chastised by big 
customers such as Germany, Putin -- who had been trying to force Ukraine 
to accept a 400 percent price increase -- quickly turned the gas back 
on. A couple of days later a deal was announced in Moscow and Kiev that 
appeared to resolve the dispute more or less equitably: The nominal 
price of Ukraine's gas rose by a mere 90 percent.

It was not until more than a month later that the Bush administration 
and other key allies of Ukraine's pro-Western government -- elected 
after the popular Orange Revolution of 2004 -- learned more about what 
was in the Russian-Ukrainian contracts. When they did they were stunned. 
Ukraine's president, Viktor Yushchenko, and Prime Minister Yuriy 
Yekhanurov had agreed to purchase Ukraine's gas through a Swiss trading 
company whose owners and beneficiaries are publicly unknown -- but are 
rumored to include senior officials and organized crime figures in both 
Russia and Ukraine. They granted this same shadowy company a 50 percent 
share in the business of delivering gas to Ukrainian consumers. They 
accepted a price deal on gas delivered to Ukraine lasting only a few 
months but guaranteed that rock-bottom rates charged by Ukraine for the 
storage and transit of Russian gas to the West would be frozen for 25 years.

What does this have to do with democracy in Europe? In effect, some U.S. 
experts concluded, the Ukrainians may have sold to Putin that which he 
was prevented from stealing: a Kremlin stranglehold on Ukraine's 
government. The Russian leader poured money and men into his huge 
neighbor in late 2004 in a blatant bid to install a pro-Moscow strongman 
as president and make Ukraine's political system a mirror of the new 
authoritarian Russian order. His overreach triggered the Orange 
Revolution and the subsequent democratic election of Yushchenko, whose 
goals include leading Ukraine to membership in NATO and the European Union.

Putin sees the fragile new democracy in Ukraine, and an allied 
government in the tiny Black Sea nation of Georgia, as dire threats. If 
Western-style freedom consolidates and spreads in the former Soviet 
republics of Eastern Europe, his own undemocratic regime will be 
isolated and undermined. What's more, Ukraine and its neighbors are 
likely to integrate with Europe rather than remaining economic and 
political vassals of Russia.

After a turbulent year of free politics, Ukraine has another crucial 
election, for a newly empowered parliament, scheduled for March 26. This 
time Putin has avoided open intervention in the campaign. Instead he 
triggered the gas crisis and presented his Ukrainian enemies with a 
choice: Swallow a mammoth midwinter price increase for the fuel 
Ukrainians use to heat their homes, just weeks before the election, or 
hand Russia a commanding long-term stake in Ukrainian energy 
infrastructure -- and the ability to trigger a gas supply crisis at any 
time. Yushchenko and Yekhanurov chose the second option, while also 
agreeing to divert some of the huge profits to undisclosed 
beneficiaries. When confronted by U.S. officials, they claimed that they 
had no choice; until now they have denied knowing who owns the shell 
company through which Ukraine will channel billions of dollars.

How to save democracy in Ukraine, and the chance it will someday spread 
back to Russia? As in the Middle East, the Bush administration faces 
some difficult choices. If pro-Western parties lead the next government 
-- something that is far from certain -- President Bush could press them 
to scrap the gas deal as a condition for taking the first step toward 
membership in NATO, a "membership action plan." But that would probably 
lead to a new face-off between Ukraine and Putin, in which Kiev would 
require U.S. and European support -- at a moment when those same allies 
are pleading for the Kremlin's help with the Palestinians and Iran.

Or the administration could decide to sidestep Putin's gas-fired 
imperialism, leaving a complicated issue to its present obscurity. The 
Ukrainians might eventually find a way to free themselves from Russia's 
chokehold. But they also might allow one of the signal democratic 
breakthroughs of the Bush years to suffer a crippling reverse.

http://www.washingtonpost.com/wp-dyn/content/article/2006/02/26/AR2006022601266.html?nav=hcmodule
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