Russian gas giant Gazprom has signed a deal with Belarus to sell gas for $100 per 1000 cubic meters (up from $45). The deal was signed right before 2007 hit and also sees Gazprom get a 50% stake in Belarus’ gas pipeline Beltransgaz.

Already one of the largest producers of gas in the world, Gazprom is seeking more command by securing control of the Belarussian pipeline, which is strategically important in delivering gas to Europe.

While there is widespread criticism of Russia for using gas prices to dictate foreign policy, there is also a counter-critique. State owned or not (Russia has a controlling package in the company), Gazprom is in the business of making money. The high profile cases of price hikes come from the Soviet past, with Ukraine, Georgia and others benefiting from friendly prices.

Did Belarus truly deserve to pay $45 when Europe pays over $200? Shouldn’t the market decide the price?

That’s precisely the lesson Georgia learned when it had to cave in to a new price of $235.

Friendly prices are usually artificial. And require friendship, not constant finger-pointing.


American and Russian diplomats met in Beijing today to discuss the North Korea nuclear disarmament talks. After North Korea’s renewed commitment to the 6-party negotiations, the five states involved (minus N Korea) are now meeting in preparation to set the frame that the negotiations will take.

The parties are reportedly in agreement on the basic notion that the Korean peninsula must be de-nuclearized. North Korea’s closer allies in the region, China and Russia, are on board and for good reason. China is the clear loser if the Koreans are to develop a credible nuclear weapons program: their Asian monopoly on the bomb would no longer stand, and their influence would diminish.

Russia has a lot to gain, if negotiations take the desired direction — North Korea signed on to the talks expecting normalization in relations as well as energy and aid. Being one of the energy moguls in the region, Russia could see a new market, something it’s been working towards already. Russia has been looking for influence in the region, going ahead with a railway project which would cross the border into North Korea. Getting energy in, would give it more influence as well as economic benefit.

A date for the talks has not been set, with the Russians suggesting a date not earlier than mid-December.

Italy’s PM Prodi has suggested that Europe needs a central power authority for the continent.

The suggestion comes after the recent blackouts across Europe.

While Prodi may find it absurd that Europe has no central power authority, it also makes sense in a free market world. No one would want one country or one entity to control an asset as essential as energy.

This is precisely the problem that Europe currently has with Russia, which controls a major part of gas exports into Russia.

Gas as Foreign Policy

November 5, 2006

Armenia has confirmed that Gazprom will freeze its prices for the country until January 1, 2009 in return for Armenia transferring control of an electricity plant.

The price freeze doesn’t only have to do with the transfer of the electricity plant, but also with the friendly relations between Armenia and Russia. Unlike Georgia, Armenia does not take unnecessary stabs at its neighbor. Georgia’s President Saakashvili is very well known for his anti-Russian stance.

That’s why this year Georgia will be paying double price for its gas. Unless Saakashvili changes his rhetoric.

That’s gas as foreign policy.

Gazprom, Russia’s state-controlled energy giant has announced plans to double the price of gas for neighboring Georgia.

Russia has been having a tough time with its neighbor of late, following the Georgian arrest of four alleged Russian spies. Without a doubt, the price hike is meant to chastise the former Soviet republic for its anti-Russian attitudes. This tactic is not new — the same strategy was used in the Ukraine last winter. Since, the Ukraine, has been more aligned with Russia; this summer, the Ukranian government settled on pro-Russian Yanukovich, as its Prime Minister.

In turn, Yanukovich has negotiated a friendly gas price with Russia.

Energy as Foreign Policy

Because Russia has used its energy resources as a foreign policy tool in the past — and no one has been able to stop it, due to its great market share — European countries tried to reverse this imbalance earlier this fall. European ministers wanted European companies to have access to the Russian market and have these companies export energy back into Europe. For obvious reasons, Russia didn’t commit.

Georgia Upset with Putin

October 21, 2006

Georgia’s foreign minister expressed anger over Russia’s portrayal of the Georgia-Russia conflict.

Apparently Georgia has not been pressuring Russia with war plans. Interesting. And why the constant military and other activity at the borders of Abkhazia and Southern Ossetia. For example, what about Saahashvili’s plan to settle Abkhazia? Seems artificial enough.

The Georgian government is concerned over the separatist tendencies in these regions and this is at the core of the conflict. The separatists are in favour of a union with Russia. After all, many of the citizens already hold Russian passports.

And it all comes down to oil and gas which is abundant in the separatist regions. No wonder Georgia is concerned, and so is the US.

Putin doesn’t commit

October 20, 2006

As expected, Russian President Vladimir Putin has not committed his country legally binding agreement.

While Russia has been a fairly open market, its energy sector has been centralized with Putin’s presidency. The country has reaped enormous economic rewards, has had its economy grow and has been able to pay off its debts at faster paces than anyone could have predicted. President Putin wants to stick to the winning formula. With a quarter of energy exports in Europe being Russian, it will be hard to persuade the president to change course. It simply is in the country’s interests to maintain the current order.

Or perhaps Putin is preparing for his post-Presidential career; there has been speculation that Putin may head Gazprom upon the completion of his term.