Vladimir Putin’s greatest weapon isn’t his special forces invading Ukraine in slow motion. It’s the fact that Russia sells Europe 30% of its natural gas. Gazprom, the $95 billion natural gas colossus, is controlled by the Kremlin.
What’s Europe going to do to punish Putin – cut off their own heat and power? In fact, the risk is that Putin will cut off the west. He’s done it before. Twice Putin cut off gas to Ukraine, both times in the dead of winter.
Gazprom doesn’t even pretend to be an independent company. It’s an arm of Russian foreign policy, designated a “strategic company,” akin to a jet fighter manufacturer. Every foreign contract must be approved by the Kremlin; prices are set by the Kremlin. It’s about as “independent” as those masked gunmen running around Crimea.
Putin uses natural gas to get what he wants. Six months ago, when Ukraine was considering an economic treaty with the European Union – pulling it away from Russia’s orbit – Putin bribed Ukraine with $20 billion worth of freebies, including a 30% cut in gas prices if it rejected the west.
But after Ukrainians deposed Viktor Yanukovych, Putin’s ally in Kiev, Gazprom jacked gas prices right back up, from $7.65 to $11.33 per thousand cubic feet. Just for comparison, the average price of natural gas in North America is about $4.50.
Gazprom’s pricing doesn’t even pretend to be based on market prices. It’s a political cartel, like OPEC is for oil. Except OPEC is 12 countries that often squabble and cheat on each other instead of fixing prices. Russia is one country that dominates Europe.
Not just Eastern European and Baltic countries, some of which rely 100% of Russian gas. But Germany, too, and even the United Kingdom.
That’s why NATO sanctions against Putin have been laughable. For Europeans, putting sanctions against Russia is like you or me putting sanctions on our electricity company.
For the rest of this column, click here: http://www.torontosun.com/2014/05/12/can-fracking-bring-freedom-to-ukraine