Wednesday, January 7, 2009

To Russia, with love

Russia. That cold eastern giant, looming like a grey cloud above Europe, covered in ice and drifting snow and men wearing really furry hats. What I'd like to know is, what's their problem? In my opinion, it is lame of them to pick on little Ukraine.

From what I can tell through my vast research, Russia is ginormous. As a matter of fact, Russia is 16,995,800 square kilometers in size, with a population of almost 150 million people. In comparison, the Ukraine is about 600,000 square kilometers, with a population of barely 46 million people. (Please ignore the metric measurements, I don't know how to convert. Focus on the numbers, Russia is way bigger.)

Over the past ten years, Russia has charged Ukraine and some other small eastern European countries a subsidized amount for the gas that fuels and heats their societies, of which Russia has vast reservoirs. In the last couple of years, Russia has begun demanding that the small countries pay a market price instead of a subsidized price for the fuel. Now, I am all about market economics, but Ukraine paid $179.50 per thousand cubic meters of fuel last year, and now Russia demands $450 per tcm for 2009. If my calculations are correct (I admit, you may want to check them yourself),that's an increase of more than 150 % in one year. Call me crazy, but that's just crazy.

Ukraine is currently in the worst recession they've seen in a decade, which probably isn't saying a lot considering they're a former Soviet-bloc country. However, the LGR (looming global recession) has severely reduced demand for their two major exports, steel and chemicals. Clearly, this hasn't helped their economic situation. Huge sectors of the population are unemployed, and the Ukranian currency lost half its value in December (read: that is bad.) They took out a $4.5 billion loan from the International Monetary Fund in November to combat that particular problem. The trick with IMF loans is that they come with a lot of conditions, not the least of which are a requirement for a deficit free budget(read: no debts.)

All this to say that it appears that they simply can't afford to pay $270 more per tcm for fuel. To do this, they would either have to create a budget deficit (which they aren't supposed to do) or cut a lot of social programs, which the unemployed and struggling population would really not appreciate. So they said "we just can't afford it." Russia's reaction to this situation? Turn off the gas. In eastern Europe, in the winter. Real classy guys.

But now it appears that they are stepping the bullying up to a new level. Gas has stopped flowing all across Europe, even in France, Germany, and Italy. The larger countries have reserves of fuel, but smaller countries like poor little Bulgaria are declaring a state of emergency, shutting down factories, with whole neighborhoods going unheated. It's freakin' cold in Bulgaria! Not cool, Russia! AND to top it off, they're blaming Ukraine! They're telling the world that the Ukrainians are siphoning off gas for their own use and keeping it from Europe. The Ukranians are trying to pass on some of their reserves to the rest of Europe to help, but let's remember their tiny size and dwindling economy.

I guess it's possible that the Ukranians are lying, that they just don't want to pay for gas, and that they really are stealing fuel from the rest of Europe for their own benefit. But really, who's believing Russia? They've been bullying people around (remember good old Joe Stalin?) for hundreds of years. I don't trust 'em any further than I could throw them, and considering I haven't started pilates yet, that's not far.


Unknown said...

So I take it you're not endorsing Vladimir Putin for a 3rd term as president?

Emily Lilley said...

No, although not like it matters, since he is the puppet-master anyway!

Anonymous said...

Well. You ask “what’s your problem, Russia?”

Ukraine, as you so beautifully pointed out, was controlled by Russia for, well, a very long time. And some might argue that it lasted even past the fall of the USSR, until the Orange Revolution of 2003. I love me some color revolutions, especially those Georgians and the Roses (I mean, come on, Mikhail Saakashvilli is one great-looking foreign leader, regardless of what you might think of him as a politician. I happen to think he’s a darn fine man). Your post here might cause people to think that Ukraine even now is handled by Russia, and could be easily argued. They struggle with the transfer of power, and the Communist Party continues to win impressive (alarming?) percentages in elections. An interesting illustration of just how much Russia has a hold of Ukraine: the translation of “the Ukraine” actually means “the borderlands” in Russian; by calling it “the borderlands,” one is implying (and others would infer) that it is only a part of a “greater piece,” i.e. Russia. Dropping the “the” was a very big deal in Ukrainian politics when they won their independence, and the fact that many around the English-speaking world still use this title upsets many Ukrainian nationals.

Back to the issue at hand, the gas cap is a big problem, sure. As of today (1/12), Gazprom (Russia’s nationalized gas company) has said it has restarted pumping gas to Europe. It’s about dang time. The Ruskies claim that Ukraine was the instigator, adding terms to a transit agreement that did not have anything to do with moving the gas into Europe – essentially pork barreling, Euro-style. Check out this lovely map:
Any gas moving from Russia to the rest of Europe pretty much has the best path via Ukraine (Belarus has WAY more problems, and Ukraine is more or less a straight shot). They can and should be able to tax that gas, since they are allowing Russian companies to use their land and oil pumps. Now as to the amount they were going for, or any other “unacceptable terms,” well … and I don’t know what they are, but it’s not all that hard to piss of Putin. I have a hard time imagining they are wildly out of line.

This is merely another chance for Russia to exert its power over the region. The Bear is still torn up about Christmas of 1991; and our boy Vladimir has called that event the “greatest geopolitical disaster” of the 20th century. Aahhhh, the good ole’ days.

If you take another look at our map, you’ll see our friend Georgia nestled in between Russia and Turkey, on the Black Sea. Yes, they are small, but YES they have lots of oil and natural gas. And YES they are run by a Harvard-educated, free market lover, my friend Mikhail Saakashvilli. Misha (Sigh, what a looker!). The West’s best hope in bypassing Russia (and China, for that matter) for all its natural gas needs lies in Georgia’s Black Sea deposits, which would require building pipes under the sea (Unda’ da’ sea!). Let’s work on that.

In closing … I’m with you, Em … not cool, Russia.

Emily Lilley said...

And, Ali once again inadvertently demonstrates how much smarter she is than me. Grazi for your fantastic geopolitical perspective!! You are a great teacher :)

Anonymous said...

I think it just shows that I am a tool. But I love you :)