In January of this year, Gazprom ???????turned-off???????? the gas to Ukraine. The reason? Some say it was economically motivated ???????? Ukraine pays substantially less than the fair market price. So, Gazprom was merely acting as any other economically driven company would.

However, perhaps the more frequent explanation for the gas crisis is that it was politically motivated. The common answer under this heading is that Russia used Gazprom as a foreign policy tool/weapon to punish Ukraine????????s new found Western focus.

Yet there is a third explanation which I believe is closer to the truth: Russia and Gazprom believe that Ukraine is a security and economic threat. As domestic prices are significantly subsidized, the strength of the Russian economy is largely dependent on energy exports.

The problem is that though Gazprom and Russia own all the Central Asian pipelines, they do not own the pipelines that connect Russia to Europe; these pipelines are owned by two transport countries: Belarus & Ukraine.

Obviously, if a country????????s revenues are concentrated in one industry, then the government will want as much control over that industry as possible. Further, the transport countries have proved repeatedly that they are willing to steal European gas from Russia by siphoning it out of their pipelines.

Given this background, Russia and Gazprom have several strong incentives to acquire a stake in or complete ownership of the transit pipelines. I believe that this was the primary reason not only for the 2005 dispute between Russia and Ukraine but also for the 2004 gas dispute between Belarus and Russia ???????? where Gazprom also turned off the gas.

The price increases which Gazprom demands from Belarus and Ukraine are reasonable. Why should these countries pay 50-75% less than the market rate? Why indeed should Gazprom continue to subsidize these countries when they continue to steal gas despite these concessions?

I suggest that the only reason for the continued subsidies has been in an attempt to gain control over the pipelines. So, the rapid gas price increases have been meant either to ‘normalize’ the prices or to obtain concessions that justify continued preferential treatment.

So, Gazprom and Russia have applied pressure on Belarus & Ukraine for both political and economic reasons. Gazprom wants to improve its yield on exports to Europe either by raising prices or by securing the transit pipelines to prevent the siphoning off of gas.

Russia wants to reduce the risk in its most profitable and lucrative industry: energy. Such were/are the causes for the recent gas disputes.

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