Money, Not Geopolitics, Drives Russian Energy Policy

Ever since Russia briefly interrupted natural gas deliveries to Ukraine on New Year's Day 2006, Moscow has been harshly criticized in the West for allegedly using energy as a tool to blackmail its neighbors. The recent spat between Russia and Belarus over Moscow's price hike on oil and gas deliveries to Minsk once again prompted charges from Western politicians and pundits that Russia is not a reliable source of energy. But where many Westerners perceive Russia as a regional bully, the Kremlin argues that former Soviet republics are not entitled to cheap Russian energy simply because Russia's major export pipelines cross their territory.

Russian commentators have complained in the last several weeks about how Belarusian President Alexander Lukashenko has sought to transform his country's image in the West from an authoritarian pariah state into yet another victim of Russia's "energy imperialism." Russians ask: Why does the West criticize Russia for subsidizing Lukashenko, and then criticize us for stopping these subsidies? And how exactly does the West expect us to get countries like Belarus or Ukraine off the dole without threatening to shut off gas supplies? Russians scoff at the idea that Lukashenko would ever agree to price increases that could threaten his grip on power simply because the European Union presented him with a polite request.

It is clear to the Russians that they can no longer afford to subsidize their neighbors with cheap natural gas while continuing to meet Russia's export obligations to the rest of the world. For months, the Russian state-owned gas monopoly Gazprom has telegraphed its resolve to make every former Soviet republic -- whether they are Russian allies, like Armenia, or less friendly states, like Georgia -- start paying higher prices. The price Belarus reluctantly agreed to on New Year's Eve, $105 per thousand cubic meters, is still just half of what Western Europeans pay. After experiencing a similar price hike last New Year, Ukraine's economy still grew at more than 6 percent in 2006.