Gas Fuels Ukraine’s Political Strife

David Marples

Former Ukrainian prime minister Yulia Tymoshenko is on trial in Kyiv for negotiating a gas deal with Russia two years ago that was allegedly unfavorable to Ukraine. Last week she was hauled off to jail for her behavior in the courtroom, which included refusing to stand when the judge entered the room and verbally abusing some of the witnesses, including current prime minister Nikolai Azarov for speaking in Russian.

International opinion has condemned the administration of President Viktor Yanukovych for what appears to be a politically based trial. One analyst commented that with this trial the Ukrainian government has “crossed the Rubicon” in its slide from democracy to authoritarianism.

These issues are less clear-cut than they seem.

On the face of it the charges are far-fetched. Tymoshenko negotiated a deal as head of the Ukrainian government. Moreover, it ended an impasse with Russia that had led to cutoffs of gas supplies to several European countries in successive winters. However, the background is considerably more complicated.

Several issues are involved: conditions for the sale of gas; the price of gas; the nature of the relationship between Russia and Ukraine; and the bitter personal rivalry between the president of Ukraine and the leader of the opposition.

The essence of the 2008-09 talks between Russia’s Gazprom and Ukraine’s Naftohaz was to eliminate the middleman, in the shape of Dmytro Firtash, who reaped a fortune through his company RosUkrEnergo, which had acquired the right under former president Viktor Yushchenko to purchase gas from Russia and resell it to Ukraine. Tymoshenko justifiably considered such an intermediary superfluous and even dangerous.

At the beginning of 2009, the Ukrainian delegation walked out of the talks on the demand of Yushchenko. However, Tymoshenko then led a personal mission and a contract was signed on Jan. 19. But once she lost her position as prime minister, Firtash was reinstalled, ironically under Yushchenko’s former 2004 rival and new president, Yanukovych.

By the agreement of Jan. 19, Russia and Ukraine established a fixed price of gas until 2020 of $450 per thousand cubic meters. At the time the price seemed accurate. Today it seems inflated and shackling. It is much higher than the price at which Russia sells gas to other countries of Europe, for example.

In April 2010, Yanukovych met with Russian President Dmitry Medvedev to discuss the deal. The revised version linked the sale of gas to prolonging the stay of the Russian Black Sea Fleet in Sevastopol. It lowered the price below the world level, but Russia has consistently requested further talks on the issue.

Herein lies another issue, namely the relationship between Russia and Ukraine. Yanukovych is often accused of selling out Ukraine’s interests to Russia. In fact, he is clinging onto Naftohaz for dear life, while the Russians are constantly demanding its merger with Gazprom. The Tymoshenko deal is often the Russians’ starting point for new discussions.

In late July, Russia cancelled plans for Medvedev to attend a naval parade in Sevastopol after the Ukrainian government rejected another proposal to merge the two gas companies. However, Moscow has since explored another avenue, namely revisiting the issue of the Russian-Ukrainian border.

Although ostensibly the border between Russia and Ukraine was guaranteed by former Russian president Boris Yeltsin back in November 1990, neither Medvedev nor Russian Prime Minister Vladimir Putin has accepted this as definitive. The stumbling block is the border in the area of Kerch and the Azov Sea, which Russia would like to declare “open water.”

The diplomatic maneuvering is not very subtle: if Ukraine comes to the table to discuss a merger of Naftohaz and Gazprom — in reality a virtual takeover by the Russian company — then the border question can be quietly dropped. Given the current Russian leadership’s penchant for re-examining the issue of borders — after the war in Georgia three years ago it recognized two breakaway “republics” of South Ossetia and Abkhazia—the Ukrainians have to tread very carefully indeed.

None of these events should detract from the unpleasantness of the Yanukovych administration, but there is no question that his government has an reasonable desire to distance itself from the expensive gas deal negotiated in early 2009. Instead, it faces a loud and well-coordinated sideshow on the part of the ebullient Tymoshenko, who found time before her arrest to make her case on a YouTube video. Like the astute politician she is, she has exploited an opportunity to pose as a martyr for Ukrainian democracy, thereby reigniting what seemed to be a fading political future.

No doubt she deserves that chance and Ukraine can only benefit from a stronger opposition. On the other hand, the external danger is equally obvious and will only increase if the EU turns against Ukraine, as it has done against Belarus in recent months.

Thus far, the Ukrainian government has avoided commitment to Russia’s customs union (known as the Common Economic Space). But pressure is building. In the fall, a meeting of the Russia-Ukraine interstate commission will take place. During his meeting with Yanukovych at Sochi earlier this month, Medvedev made the following comment: “If you don’t mind, we’ll talk about whether Ukraine finds it reasonable to be part of any alliance with Russia.”

Under these circumstances, the stupidity of trying to remove Tymoshenko and her 2009 gas deal from the equation is understandable, if not forgivable.

This article appeared originally in the EDMONTON JOURNAL, 15 August 2011.


Distinguished University Professor, University of Alberta


  1. Lets hope Yulia Tymoshenko is released. There is a movement gathering on Facebook for her release. I have put a link about your blog on my Ukraine page. Thanks Robert.

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