Flow of Russian Oil Resumed After Price Dispute

The flow of Russian oil through Ukrainian pipelines to Europe has been restored after a price dispute between Moscow and Kiev led to the disruption. Marshall Goldman, associate director of the Davis Center of Russian Research at Harvard University, discusses Russia's oil spat with Ukraine over the weekend.

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ROBERT SIEGEL, host:

Talks between Russia and Ukraine have resumed over natural gas, and Russian gas is flowing once again through Ukraine and across Europe. That was the natural state of affairs until this past weekend's gas crisis, in which Russia demanded a higher price from the Ukrainians, reduced the flow and then accused Ukraine of stealing gas it should have let continue west through the pipeline to Russia's other European customers. What this portends for Europe's reliance on Moscow, what it means for Russian-Ukrainian relations are all questions raised by the weekend's events and they're questions, among others, that we'll put to Marshall Goldman, who watches the Russian economy from the faculty of Wellesley College and the Davis Center of Russian Research at Harvard.

Welcome back to the program.

Professor MARSHALL GOLDMAN (Davis Center of Russian Research): Thanks, Robert.

SIEGEL: What did Russian President Putin have in mind when he said he wanted to increase what had been a negotiated price of about $50 for a thousand cubic liters of natural gas to well over $200 from the Ukrainians?

Prof. GOLDMAN: I think he had several purposes in mind. I think uppermost was the fact that on March 26th there's going to be an election in Ukraine and he's hoping that his candidate, his preferred candidate, the one that's more interested in aligning Ukraine with Russia, will win. Remember just almost a year ago in December 2004, Yushchenko, who wanted to look to the West, to Europe, won and Putin, I think, was embarrassed when his preferred candidate, Yanukovych, lost. So by discrediting Yushchenko, he's hoping this time Yanukovych, in a sense, will come back.

The second thing is I think he wanted to discredit Ukraine in the European Union. Ukraine wants to join up with the European Union and to the extent that Ukraine is going to cut back some of the natural gas flowing through the pipeline that, I think, Putin thought would embarrass Yushchenko and Ukraine.

And one more: This is--to avoid all this, Russia just proposed the building of a pipeline through the Baltic Sea to Germany and avoid Ukraine and Belarus so there could no longer be these kinds of embargoes or disruptions. And there was opposition to building of this pipeline, and I think what Putin was hoping was to convince the Europeans to support that pipeline. So I think all these factors entered into his calculation.

SIEGEL: Well, if those were his calculations, he appears to have miscalculated because...

Prof. GOLDMAN: I think he...

SIEGEL: ...Western Europe has come down on him hard for doing this.

Prof. GOLDMAN: I think he has. You know, it was fascinating to watch what the Russians were saying. Their public relations man, first of all, is a bit of a disaster, but he was saying, `The Ukrainians stole our gas. They st'--he just kept saying that. What the Europeans understood was it may very well be that the Ukrainians siphoned off some of the gas, but the Russians were doing exactly the same thing to the gas that was coming to Ukraine from Turkmenistan through the Russian pipeline. So, you know, you can't have it both ways, and I think the Europeans understood that. And Putin's insistence that Russia was a reliable supplier of energy, I think, now has been brought into question.

SIEGEL: So far, it seems that the issue over how close to Russia Ukraine should be politically or how European as opposed pro-Russian Ukraine should be, this has been argued out in the field of energy prices, which is relatively civilized compared to the ways it might be battled out. Is it going to stay there? Is this conflict going to remain one essentially over trade and energy costs?

Prof. GOLDMAN: There's possibility for all kinds of other battlefields developing. The Russians have leased from the Ukrainians a naval base in the Crimea and what the Ukrainians are saying, `OK, you're going to raise the price of natural gas that we get, well, we're going to raise the lease.' The Russians say, `You've got a contract.' The Ukrainians say `We have a contract.'

There's also, you know, a kind of a irony here that this pipeline, which is so controversial, goes not only to Western Europe, it also goes through Ukraine to parts of Russia. And the Ukrainians have cut that off. And, you know, once these really two peoples, both Slavic nations, start arguing this way, you have no idea where it's going to go. This is really a most bizarre kind of development. Each one is playing chicken with the other.

SIEGEL: Marshall Goldman, thanks a lot for talking with us once again.

Prof. GOLDMAN: Thank you, Robert.

SIEGEL: And happy new year.

Prof. GOLDMAN: Same to you. It's always exciting to look what's going on in that part of the world.

SIEGEL: Marshall Goldman, who is associate director of the Davis Center of Russian Research at Harvard University and professor of economics at Wellesley College.

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