Russia began 2006 by cutting off natural gas exports to Ukraine after its government refused to pay a fourfold increase in the subsidized price. The crisis in Ukraine, many of whose Soviet-era industries depend on cheap Russian gas, soon spread to Europe, which consumes 80% of Russian gas exports, when Ukraine began to divert gas from the pipeline that crosses its territory.
Ironically, 2006 is also the year that Russia takes over the chair of the Group of Eight industrialized countries, which is set to meet in Moscow this spring. The improbable theme that Russian President Vladimir Putin chose for the conference is energy security.
Even though it is no longer a global superpower, Russia’s vast oil and gas reserves make it an energy superpower, and Putin seems intent on playing that card. Oil provides somewhat less economic power than gas because it is a fungible commodity, and interruptions of supply can be made up by purchases on world markets. But gas is expensive to transport, for it depends on costly pipelines or gas liquefaction facilities that cannot be replaced quickly when flows are interrupted.
Gas provides a tempting form of leverage, and Russia had already used it against Georgia, Latvia, Lithuania, and Moldova. But when Gazprom, the Russian state gas monopoly, followed Putin’s instructions to turn off the spigot to Ukraine, Russia crossed a new threshold.