Columbia International Affairs Online: Working Papers

CIAO DATE: 03/2011

European Energy Security: Reducing Volatility of Ukraine-Russia Natural Gas Pricing Disputes

Richard Andres, Michael Kofman

February 2011

Institute for National Strategic Studies


On January 7, 2009, the existing energy relationship among Europe, Russia, and Ukraine broke down over a natural gas dispute, just as it had done 3 years earlier. Amid subzero temperatures in many parts of Europe, Russia turned off its gas supply to Ukraine, causing shortages in more than 20 European countries. Thousands across the continent were left in the dark, and government services were closed. While the flow of gas was eventually restored, Russian gas disputes with Ukraine continue, and the prospect of another Gazprom shutoff has become an annual event for European consumers. Despite earlier indications that another breakdown in negotiations would lead to blackouts in Europe early in 2010, the potential crisis was averted via a Russia-Ukraine deal that restructured earlier payment and pricing arrangements. However, it is doubtful that Ukraine can continue timely payments for its domestic gas consumption and maintain its own pipeline infrastructure. Fundamental changes to Russia-Ukraine energy transport agreements are coming. The annual game of gas brinkmanship played by Russia and Ukraine is of strategic significance for the United States and its allies for two main reasons. First, when talks break down, Europe suffers. If the current situation continues, at best, Europe must live with continuing energy insecurity; at worst, a total breakdown of negotiations between the supplier and transit country could leave many European countries without heat or electricity. Equally important, however, is that this problem's resolution will have important implications for power politics in the region. Russian Prime Minister Vladimir Putin has argued that Russian power in Eastern Europe depends on its role as Europe's energy arbiter. Russia is currently attempting to resolve the dispute with Ukraine by increasing its control over that country's gas transit infrastructure, a solution that would significantly boost Russia's ability to use gas as a political lever against states within the region. The United States has an interest in supporting solutions that will decrease the vulnerability of its European allies to potential Russian pressure.