By Zoltán Dujisin
KIEV, Dec 27 2005 (IPS)

Russia is playing the energy card by raising state-owned Gazprom’s fuel prices, in what Ukraine has termed a politically charged move.

The country of 50 million is heavily reliant on Russian gas, and has been left in an even more vulnerable position as the last year has been characterised by a political, social and economic crisis. Most former Soviet republics are dependent on subsidised Russian gas, and the price increase affects all of them except Belarus, one of Russia’s few ‘friendly’ neighbours. Difficulties in reaching an agreement over the new price have led to warnings from the Russian side that it could cut supplies. In Russia’s view a market-oriented Ukraine should be able to cope with gas at market prices, but for Kiev such a decision can only deepen the political crisis and shake the economy. The move is seen as cold-blooded revenge served one year after the liberal Viktor Yushchenko, who favours joining the European Union (EU) and the North-Atlantic Treaty Organisation (NATO), was elected President, much to Moscow’s displeasure.

Additionally, efforts by Ukraine to have the World Trade Organisation (WTO) upgrade its status to that of a market economy weakened its own argument.

Ukrainian Prime Minister Yury Yekhanurov said on television Tuesday that the country is entitled to 15 percent of Russian gas channeled through its territory, and that it wants to use its transit position in the European market to appease Russian intentions.

Eighty percent of Russian gas exports go through Ukrainian territory. Ukrainian officials have added to tensions by failing until Tuesday to exclude the possibility of ‘deviating’ some of Russia’s gas that runs through the country.

Ukraine has also threatened to increase the rent for the Russian Black Sea Fleet stationed in Crimea. Armenia, another former Soviet republic, has expressed similar intentions over a Russian military base.

While insisting it will be able to find alternatives to reach European markets, Gazprom conceded Sunday that an agreement was realistic if Ukraine paid market prices partly in cash and partly “in goods that interest us”, so as to give Ukraine time to “get used” to new prices.

The Russian proposal is aimed at purchasing Ukrainian gas pipelines, but Ukraine has replied this would threaten its energy independence. If an accord is not reached soon, the two neighbours could resort to arbitration.

Yet some experts feel a rise in fuel prices is positive in the long-term as it might force Ukraine’s energy industry to modernise its obsolete infrastructure. Estimates show 70 percent of imported energy goes to waste due to inefficiency.

Gas will be a hot topic in the upcoming parliamentary elections, as gas expenditures account for a considerable portion of Ukrainians’ spendings, especially in winter. The rise in fuel prices is likely to worsen living conditions for a population that is already facing serious economic difficulties, and the change will be linked to the government’s new westward orientation.

Due to a constitutional reform soon to become effective, and only one-and-a-half years after the presidential run, the new election parliamentary election in March could be just as decisive, since it will elect a new prime minister with unprecedented powers.

The current government is unlikely to lift the population from its state of mistrust and disappointment. With average Ukrainians not seeing improvements in their difficult economic situation, corruption accusations have marred the previous cabinet’s work, culminating in the dismissal of then popular prime minister Yulia Tymoshenko by President Viktor Yushchenko.

The scandal ended many of the illusions created by last year’s ‘Orange Revolution’, the result of popular protests which for the majority of Ukrainians were to represent a symbolic break with a past of corrupt and authoritarian regimes. Yet precisely one year after Yushchenko was elected, little progress has been made except in the freedom of speech department. Expectations were exceptionally high, and now the level of disappointment is not lagging behind. The former were “somewhat unrealistic”, Alexander Demyanets from the Razumkov Centre, an independent centre for economic and political studies told IPS, because they created the illusion that “younger and better educated Ukrainians would finally get a chance to rise up and bring fresh perspectives.”

There was certainly a change in the public atmosphere of Ukrainian politics with an increased media role and public scrutiny, but most key figures both in the administration and in opposition remained the same. “They espouse familiar ideas, make familiar promises, and oftentimes use familiar tactics to woo voters,” Demyanets said.

A year ago public opinion hoped the parliamentary election would be a choice between different visions for the country’s future. Instead “they realise that once again, the choice will be between the lesser of the evils,” Demyanets said.

In a mostly uncertain electorate, Yanukovich’s Party of the Regions leads the opinion polls with 17 percent of the popular vote, followed by Tymoshenko’s bloc with 12.8 percent, and Yushchenko’s Our Ukraine Party with 12.4 percent. While part of the Ukrainian electorate remains idealistic, many more are likely to look at their own wallets when voting in March.

Yanukovich, a former pro-Moscow prime minister and a member of the old guard, is the only candidate who has gained popularity during the last months, and will most certainly gain from the gas crisis, as many Ukrainian voters become ‘nostalgic about the former regime’s friendly relations with Russia.

Others will accuse Russia of once more meddling in Ukraine’s internal affairs. But as Kremlin adviser Oleg Pavlovski told the foreign press, Ukraine could not expect any other treatment. “When your lover leaves you, you don’t leave her your credit card.”

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