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. Last Updated: 07/27/2016

Energy Wars: Ukraine, Russia as Reluctant Allies

A resurgent dispute between Ukraine and Russia over energy prices is proving that, like a badly matched couple, the two economically stricken allies can neither live with nor without each other.


The dispute resumed last weekend and has escalated to the point that Moscow is threatening to starve Ukraine of affordable energy supplies, poisoning already strained relations between the two countries.


Gazprom, the Russian state gas monopoly, has said it will cut gas supplies to Ukraine until a 165 billion ruble ($295 million) bill is paid and that in the future it will charge Ukraine world prices for gas.


In return, Kiev has threatened to charge world prices for the transport of Russian gas exported to the West 95 percent of which is piped across the territory of Ukraine.


The Ukrainian deputy prime minister in charge of energy, Yuli Ioffe, arrived in Moscow on Wednesday to prepare the ground for talks. Leonid Kuchma, the Ukrainian prime minister, is to follow on Monday, according to the Ukrainian Embassy in Moscow.


A Ukrainian energy official denied that Kiev owed any money on its gas bill in an interview with Nezavisimaya Gazeta on Wednesday. But late payment is almost certainly not at the heart of the dispute.


This is the second time that Kuchma has had to rush to Moscow for emergency negotiations over energy prices. The last was in mid-January.


For Ukraine, the prospect of having to pay world prices for its oil and the 69 billion cubic meters of gas it imports from Russia each year is horrifying. It would lead to dire energy shortages and contract an already shrinking economy.


But the recurrent squabble over energy prices is no more than a sub-clause to larger - ultimately political - debates between the two Slav neighbors.


The more serious issues involve division of assets and debts of the former Soviet Union, the disposition of the Black Sea fleet and the terms under which Ukraine will give up its nuclear arsenal.


Last week President Boris Yeltsin signed a decree declaring that all foreign assets of the former U. S. S. R. are the property of Russia.


That incensed Kiev, which has been pressing to get a share of the assets in return for paying its 16. 37 percent share of the $80 billion Soviet debt.


Although Russia has agreed to pay the whole of the former Soviet debt in return for the assets, the Ukrainians believe that Moscow has downplayed the true value of the Soviet assets, leaving Ukraine with a raw deal.


After Kiev objected, the dispute over gas prices reemerged together with renewed threats that Russia will demand world prices for the 20 billion tons of oil promised to Ukraine this year.


The linkage between all these disagreements is no secret. "If Ukraine wants us to subsidize its economy, they should give us good reasons to do so", Deputy Prime Minister Alexander Shokhin told journalists last week.


Shokhin made it clear that Kiev should not expect lenience on energy prices if it was not prepared to give ground on the debt sharing dispute or on the vexed question of how to divide the Black Sea Fleet.


But the bottom line in the whole domino line of payment disputes is that Ukraine cannot afford full independence from its larger neighbor. Although Kiev has recently struck oil deals with Kazakhstan and Iran, the Ukrainian economy is in even worse straits than the Russian and it cannot afford to buy all of its energy needs on the world market.


That has left Moscow with enormous leverage to exert over a country that many Russians believe should not be separate at all.