Posted on July 14, 2008 - by Venik

Practice What You Preach

For years there has been a continuous stream of criticism about Russia using its energy companies to advance the state’s political goals. Every time Gazprom tried to get Ukraine to pay a fair price for the gas, the US and the EU exploded with allegations of “energy blackmail”. How is it blackmail when all Russia wants is to have Ukraine pay the same price for the gas as the EU customers are paying?

There were no political demands attached to any of the gas price increases. Russia never said: do something or we will increase the price of gas. Gazprom never tried to charge Ukraine more than what its other customers were paying. On the other hand, Gazprom is paying the same rate for the transfer of its gas across Ukraine as it pays to Poland and Germany. If anybody is guilty of “energy blackmail” that would probably be Ukraine, which threatens to increase gas transit charges every time Russia raises gas prices.

The West has been always criticizing Russia’s energy sector, saying that it is too heavily politicized. And yet, under political pressure from the Western governments, most Western energy giants pulled out of the Iranian market. Recently, Total announced its decision to abandon its projects in Iran due to political complications. Western energy businesses are forced by their own governments to abandon profitable Iranian projects, and the “heavily politicized” Gazprom is growing its presence in Iran, picking up Total’s abandoned contracts. So much for the Western free-market economy concept.

The funny thing is that Western energy companies had relatively few problems working with Iran, which offered a stable environment for Western investors. Russia, on the other hand, had caused Western energy producers nothing but grief over the past several years. And yet, the West is pulling out of Iran and abandoning the lucrative contracts to be grabbed by Gazprom and other Russian companies. A bit of an economic and philosophical inconsistency, wouldn’t you say?

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