Scholar Studies Eurasian Pipeline Politics

For the past decade, Andreas Heinrich has studied the oil and natural gas sector in the former Soviet Union. During this period, Ukraine was devising policy to consolidate its independence but, despite efforts to distance itself from Russia in certain areas, found itself inevitably reliant on Russia for energy supplies. Heinrich, a Wilson Center fellow and a senior researcher with Poland's Koszalin Institute of Comparative European Studies, is studying the tensions, as well as the opportunities for cooperation, between Ukraine and Russia, as part of a forthcoming book on Eurasian pipeline policy.

In January 2006, Russia temporarily suspended gas shipments to Ukraine in what was a much-publicized fiasco for Russia's gas monopoly, Gazprom. Although widely condemned as a political move by Russia, the conflict was largely economically motivated, Heinrich argued, with disputes dating back much earlier.

"Russia and Ukraine have had conflicting relations for some time," said Heinrich.
Several countries in the region have repeatedly accused Russia of using its energy supplies to undermine their political independence. But, for Ukraine, "the gas crisis is not purely politically motivated," he emphasized.

Ukraine had accrued great debt during past failures to pay for Russian gas imports, which led Russia to decrease supplies in 1992-1993. Russia was compelled to resume supplies to Ukraine at that time to appease its central and western European customers, Russia's main markets. The situation improved after Ukraine settled its gas debts by waiving transit fees it had charged Gazprom for using Ukrainian pipelines. In fact, more than 70 percent of Gazprom's exports are shipped through Ukraine.

By late 2004, Ukraine criticized parts of its 10-year gas contract with Russia, signed in 2002. The media initially ignored the complaint but did report on it a year later, when Russia cut off supplies. Heinrich said world opinion was unfair in only criticizing Russia's actions when, in reality, "The problem started earlier between the two countries and Ukraine is partly to blame."

The energy issue goes to the heart of Russian-Ukrainian interdependence. "Ukraine needs Russia's gas and Russia needs Ukraine's transit routes to the west and needs Ukraine as a consumer," said Heinrich. "But transit countries [such as Ukraine] do have a bargaining chip against energy dependency."

Linking transit fees to gas supply has been the source of numerous past bilateral disputes, said Heinrich. The dispute with Ukraine led Belarus to threaten Gazprom over transit fees in early 2004. Meanwhile, the European Union has been pressuring Russia to deliver gas to its customers in a unified scheme with equitable prices. Heinrich said, "In response, Gazprom currently is trying to introduce market prices to all countries of the former Soviet Union while increasing prices to Poland, which currently pays less than western customers."

Alternative pipeline projects are underway to deliver Russian gas to European consumers. But their limited capacities make them unlikely to replace the existing pipeline grid and Ukraine will still be piping and, therefore, partially controlling a substantial portion of Russia's gas export capacity to central and western Europe.