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Russia

Russian-Ukrainian Accord Does Not Ease Regional Security Concerns

Igor Torbakov Jan 9, 2006

Although Russia and Ukraine have settled their differences over the price of gas deliveries, concerns over energy security are lingering in Europe. The maintenance of steady supplies could depend in part on unpredictable Turkmenistan.The complex pricing plan forged by Russia and Ukraine involve at least two tricky points, most independent energy analysts suggest. First, it dramatically enhances the role of a shady intermediary company that will serve as the sole gas provider to Ukraine. Second, the deal appears to be hinging on Central Asian supplies, in particular on gas coming from Turkmenistan, a country whose energy policy is notoriously fickle.Under the terms of the five-year accord, Gazprom, Russia's state-run energy monopoly, will sell gas to an intermediary, RosUkrEnergo, at a rate of $230 per thousand cubic meters (tcm) -- the price that it had insisted Ukraine pay. Ukraine will then buy gas from RosUkrEnergo for $95/tcm – nearly twice what it had previously been paying Gazprom. RosUkrEnergo, which is owned by Gazprombank and a Swiss subsidiary of Austria's Raiffeisen Bank, claims it can pay and charge different prices because it will also be buying gas from the Central Asian nations of Kazakhstan, Uzbekistan and Turkmenistan for comparatively low prices. According to Ukraine's President Viktor Yushchenko, Turkmen gas will cost roughly $50/tcm.The deal has raised the eyebrows in many quarters. RosUkrEnergo opaque operating structure and methods have prompted many energy analysts to believe the company to be a front, designed to facilitate corrupt practices. Its true beneficiaries, some well-informed sources contend, can be found among the Gazprom's senior management and the Kremlin leadership. In addition, Raiffeisen Bank reportedly represents unnamed Ukrainian investors. The deal has already met considerable political opposition in Ukraine.Another dicey aspect of the deal, energy analysts say, is the assumption that the Central Asian nations will continue to serve as reliable suppliers at existing, rock-bottom prices. While Kazakhstan and Uzbekistan are relatively minor gas producers, Turkmenistan, which supposedly holds major gas reserves, has exhibited signs of discontent over existing gas prices. Turkmen leader Saparmurat Niyazov is likely to try to take advantage of the Russian-Ukrainian pricing dispute by seeking a better price for Turkmen energy, some experts suggest. "Turkmenistan can now put forward the argument to Russia that

Igor Torbakov is a freelance journalist and researcher who specializes in CIS political affairs. He holds an MA in History from Moscow State University and a PhD from the Ukrainian Academy of Sciences. He was Research Scholar at the Institute of Russian History, Russian Academy of Sciences, Moscow; a Visiting Scholar at the Kennan Institute, Woodrow Wilson International Center for Scholars, Washington DC; a Fulbright Scholar at Columbia University, New York; and a Visiting Fellow at Harvard University. He is now based in Istanbul, Turkey.

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