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Russia: Gassing the Neighbors

Prepared by: Lionel Beehner
January 3, 2007

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At two minutes before midnight on New Year’s Eve, Belarus and Russia struck a deal (Bloomberg), narrowly averting an energy crisis similar to last January’s row with Ukraine that temporarily severed gas supplies to Western Europe. The standoff, which resulted in a doubling in the price of Belarus’ gas, reinforces Russia’s role as the continent’s main supplier of energy and underscores the geopolitical consequences (WashPost) of Europe’s growing dependency. Officials at Gazprom, the state-run Russian gas monopoly, swear their motivations are purely commercial, not political. But many analysts, as well as this CFR Task Force, suspect a Kremlin emboldened by soaring gas prices of using Gazprom as a political tool. As a New York Times editorial puts it, the West “remains vulnerable to President Vladimir Putin’s whims.”

Thus, energy security remains foremost on the minds of EU diplomats, as Germany assumes the reins of both the European Union and Group of Eight (G8). “We have to create a clear understanding in Moscow that this is not a zero-sum game,” Klaus Scharioth, Germany’s U.S. ambassador, tells CFR.org’s Robert McMahon. Energy security also topped the agenda during Russia’s G8 presidency last year, but nothing of substance emerged and EU-Russian relations, at least on energy issues, remain largely frozen. Russia continues to supply Western Europe with a quarter of its gas, while Europe remains Gazprom’s biggest customer. But Russia’s heavy-handedness in sorting out energy disputes with its neighbors, as this new Backgrounder explains, has caused some EU officials to question Russia’s reliability as an energy provider and to seek alternative supplies. Moscow’s recent grab of a majority stake in Sakhalin II (FT), Russia’s largest foreign investment project, did little to allay these concerns.

Experts say Russia’s economic growth, fueled by rising oil prices, will only make Moscow more assertive down the road. But Fiona Hill of the Brookings Institution reckons that Russia will be “a different kind of power (PDF) in the twenty-first century from what it was in the twentieth,” relying more on soft power than the hard power that led it “to invade, conquer, and colonize territory in the past.” That is, while military conflicts may be a thing of the past, economic disputes will likely become more frequent. Dmitri Trenin of the Carnegie Moscow Center agrees that Russia’s energy windfall may soften its stance on the political rifts it has had with Europe and the United States (NATO expansion, “color” revolutions, etc.). “To the extent that the Russian ruling elite cares about the West, it cares about economics, particularly the markets for oil and gas,” he writes in Foreign Affairs.

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