New Round of Russia-Ukraine Gas Conflict

Yevgeny Volk / March 31, 2009

The past week saw a specter of a gas dispute between Russia and Ukraine rising again, reviving fears of dramatic economic and political consequences for both the two nations and Europe at large. These developments were caused by an agreement between the European Union and Kiev designed to overhaul its gas pipeline network. Under the Brussels accords, Ukraine is set to receive from big Europe over $2.5 billion to upgrade its gas grid. In return, Kiev guarantees gas transit transparency and equal access to the gas pipelines.

This agreement drew the Kremlin’s ire, as it would undercut Gasprom’s monopoly on transiting Russian gas through Ukraine’s territory. The Russian delegation attending the Brussels talks left the forum in protest.

Russia instantly retaliated with sanctions against Ukraine and the EU. Specifically, Moscow is postponing the Russian-Ukrainian inter-governmental consultations on lending Kiev $5-billion. The loan delay could deal a serious blow to Ukraine’s economy and the Timoshenko government. (more…)