Yulia Tymoshenko is celebrating - the Supreme Rada of Ukraine has finally elected her the prime minister. Hours after her appointment Tymoshenko confirmed Gazprom's fears, recently voiced by the company's official representative Sergei Kupriyanov, and announced that she wants to review the gas price agreement signed earlier this month, to get rid of the intermediary companies (notable RosUkrEnergo) and to return the practice of intergovernmental agreements regarding gas prices. Now, does that remind us of something or what? I feel like I'm riding the time machine - even if it's only a couple of years back.
Clearly, if there is anything to review about the price agreements, it has to be done now, because after January 1, 2008 the prices of Russian gas will be established de facto and it will be difficult to do anything to change them. But this really does seem like a bad joke already. Short on other tricks Tymoshenko keeps pulling the gas price card out of her sleeve on the eve of every New Year and it is getting tiresome. Only this time the situation may not be in her favor. Back in 2005 Tymoshenko was the "Orange Princess" with overwhelming popular support. Today she is prime minister-elect only because the members of her own Orange coalition were forced to vote openly in the Rada. It is no longer possible to accuse Russia of trying to strangle the freedom-loving Ukraine with high gas prices in order to punish it for the wrong vote. Tymoshenko is the head of an uneasy coalition government, not a princess of the majority, and Russia no longer needs to "punish" Ukraine for anything because it has established an uneasy but more or less stable truce with its President Viktor Yushchenko.
Moreover, Tymoshenko has very few instruments to actually influence this process. She has the populist rhetoric under her belt, but Yushchenko understands the values of realpolitik. He has tried to keep Tymoshenko out of gas price talks back in 2005 and had addressed the Ukrainian public with requests to refrain from politicizing the issue of gas prices after the agreement was reached several weeks ago. Starting in 2008, Ukraine has agreed to pay a price of $179.50 per 1,000 cubic meters of Central Asian gas sold to it by Gazprom. The price formula includes $145 price of the gas itself plus $36-37 of transit fees and a 2 percent commission to GazpromExport and RosUkrEnergo. Even if Tymoshenko insists on removing the intermediary RosUkrEnergo, that won't decrease the gas price by a lot and there is nothing else to cut in this price formula.
What is more, Ukraine's neighbors may be paying as much as $300 per 1,000 cubic meters starting next year, so Kiev should consider itself lucky to have such conditions. Tymoshenko could, of course, try to negotiate a separate agreement with Turkmenistan, but the country's President Gurbanguly Berdymukhammedov had demonstrated rather clearly that he prefers Russia as his partner, at least in the short-term.
The question is then, are we going to see the new iteration of the gas tap conflict this January? I believe that this is unlikely. President Yushchenko and Prime Minister Tymoshenko are no longer allies as they were back in 2005. Yushchenko will try to keep Tymoshenko away from gas negotiations.
He also can (in cooperation with Gazprom) let his new prime minister drive herself into a corner, trying to offer solid arguments why Ukraine should be paying a lower price for the natural gas it receives. Even if Tymoshenko insists on making the gas price issue into a full-blown conflict, most likely she will have to take up arms against Russia's new prime minister - Vladimir Putin - and Putin can be expected to give up no ground in this argument. So, this is a déjà vu of sorts, because we are seeing the escalation of prolonged conflict for the third year in a row. But the roles have changed and if the Russian gas monopoly and the Russian government play their cards correctly, it will be Tymoshenko and her irrepressible populism that will suffer from this situation.
By Marina Pustilnik
