The gas dispute between Russia and Ukraine came to an end yesterday.
People were somewhat surprised when Ukraine readily accepted the charge of $230 per 1,000 cubic meters on which Russia had been insisting. But it's natural if one examines the background of the gas row.
First of all, Russia is tired of serving as a "milk cow" for "orange revolutionary". In recent years, Russia has been providing energy to countries of the Commonwealth of Independent States (CIS) including Ukraine at a price much lower than international standards. But its generosity and fraternity only won alienation and resentment from the "calves", instead of gratitude and rewards. Russia began to reflect on its energy policy.
Russia targeted Ukraine by charging the highest price because Ukraine is the most important country to it in the CIS, and also the one who "hurt the Russian feelings" most. Frictions between the two sides are particularly on the rise since the "orange revolution" broke out in Ukraine at the end of 2004. After Viktor Yushchenko took presidency, Ukraine drifted further away from Russia and sped up its steps towards the NATO and EU. The country even joined hands with Georgia to form a nine-member Community of Democratic Choice, an organization posed, as is believed, to replace the Russia-lead CIS or at least leave it an empty name. By hiking the gas price Russia wants to warn Ukraine: political alienation must be at the cost of economic benefits.
Secondly, Russia feels fully justified to raise its gas export prices. The country is making all out efforts to join the World Trade Organization. The EU has made its hope clear that Russia could adopt its gas prices to international standards as soon as possible. At the end of 2005, the EU granted market economy status to Ukraine. So Russia believes that Ukraine should earnestly carry out its duties as a market economy by accepting international gas prices Russia asked.
Thirdly, Ukraine cannot develop its economy without gas from Russia. The two depends heavily on each other when it comes to gas supply. Ukraine can only produce 16 percent of its domestic demand and the rest must be imported from Russia and Turkmenistan, while 80 percent of gas Russia exported to Europe must be transported via pipeline in Ukraine, which accounts for more than 20 percent of total European consumption. For a long time, Russia has been providing gas to Ukraine at favorable prices in return for cheaper transit fees, and Ukraine also depends on low-price Russian energy for economic development. Being cut off from Russia's gas, Ukraine's economy will face the danger of collapse.
Fourthly, external pressure from the EU works. Many EU members are major users of Russian gas and have been badly affected by the dispute. To keep their good relations with Russia they urged Ukraine for an early agreement. Losing the important support from the EU, Ukraine had to give in to Russia in this round of gas boycott.
