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Saturday, June 10, 2006

Dispelling Putin’s Gas Rhetoric

Lecturing the Western media, President Putin found himself in one of those rhetorical roller-coaster loops where he managed to put a brave face on a grisly case. The Kremlin’s highly articulate Tarzan thumped his chest, taking credit for years of subsidizing the Ukrainian economy.

He also shamed the West for not being cooperative as Russia struggled hard to get the monkey off its back. (Now see this! Ukraine piggy-backed by Russia — fantasy meets hardcore, eh?)

The moment Ukraine checked out of Putin’s paradise, the West should have taken the poor crittur under its wing, so his argument went. After all, having welcomed the Orange Revolution, the West should now shoulder the burden. It should not shun helping Ukraine pay its way to the EU. And that includes the energy bills. Why in the world should the Russian heartbreak hotel pay for it?

On the face of it, Putin’s mounts a no-nonsense defense of the Russian taxpayers’ money. However, a casual perusal of a history textbook would reveal that the subsidy portion of his argument may not be as solid as it seems.
For over three hundred years Ukraine had been a colony of Russia. A waste of imperial resources? The tsar’s treasurers had had enough of a time frame to determine whether Ukraine added any value.

Thousands of Ukrainian Cossacks left their bones in the marshlands from which St. Petersburg, Putin’s native city, sprang. By that time Ukraine was called the breadbasket of Europe.

In the 1930s, Stalin carried out his business plan of industrialization and collectivization. Some 7 million Ukrainian farmers lost their lives ‘cross-subsidizing’ it.

Back in the 60s, when Puttie was a pioneer, the Soviet equivalent of a boyscout, Ukraine supplied a good share of the coal and gas within the country whose Communist ideals he worshipped. And he worshipped them with a devotion so intense that he couldn’t resist a career with the KGB. The Soviet Union’s deadliest line of ICBMs, including the SS-18 'Satan,' was made by Yuzhmash, the Dnipropetrovsk, Ukraine-based aerospace powerhouse. That’s where Putin's eager beaver buddy Kuchma bossed around. Any Freudian interpretations?

In the 70s and 80s, the Ukrainian Soviet Socialist Republic dispatched its human capital to the newly discovered oil fields in Siberia, a region where the Gulag relocation program had already placed millions of Ukrainians. Almost 3 million Ukrainians, most of them with college degrees, are now living in Russia, according to the 2002 census. Any schools where their kids can learn Ukrainian? One or two in the entire Russian Federation.

Following Ukraine's independence, Russia had indeed supplied Ukraine with oil and natural gas at discount prices. Still, there's something Putin failed to mention.

First, transit fees for Russian gas, 80 percent of which is exported to Europe via Ukrainian pipelines, had conveyed equal generosity.

Second, common Ukrainians were not the only ones who cashed in on the energy subsidies Putin talked about. With the steel boom that took off at the turn of the millenium, Ukraine's already privatized yet energy-guzzling industry accounted for the bulk of the energy consumed in the country. The profits went straight to offshore companies run by Moscow-friendly uber-oligarchs like Pinchuk and Akhmetov, the driving force behind Yanukovych. Mr. Putin had campaigned for this candidate on Ukrainian national television and even prematurely congratulated him.

Third, once the 'Energizer Bunny 2004' was gone with the Orange Revolution, Putin and his Kremlin strategists dove into a state of watchful hibernation. They resurfaced on New Year's Day and sent shock waves throughout the world with their second shot at Ukraine. Nothing could be more favorable for the 'big one' they held in store than the monthlong Orange ordeal raging on in Ukraine, so they thought. In Ukraine's parliamentary campaign they set out to inflate Yanukovych with the gas issue so as to land him in the high-stakes PM seat. Starting with Jan. 1, 2006, a constitutional amendment trimmed the powers of the President while empowering the Prime Minister.

Somehow, Yanukovych fell short of gaining a majority in the election. As soon as the Orange coalition gets hammered out, he will helm the opposition.
Unfortunately, Russia's commitment to market pricing does not extend to the Crimea. For an annual price that resembles the revenues of a soccer stadium, Russia rents a naval base there the size of a city.

Without the shadow of a doubt, Ukraine has outstayed its welcome on Russia’s energy welfare rolls. Despite that, through a panoply of proxy parties operating in Ukraine the Kremlin keeps comi
ng back propositioning. The deal boils down to this: gas in exchange for freedom.

May there come a day when the Ukrainians will live in a neighborhood where they won't have to wear gas masks. And if their government keeps its breath free of gas, the Russians will be better off too.

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