COMMENTARY: There is a silver lining in Ukraine-Russia gas wars (01/08/06)

COMMENTARY

There is a silver lining in Ukraine-Russia gas wars

by Walter Prochorenko

Regardless of the outcome of Ukraine's gas crisis, which was recently precipitated by Russia's exorbitant and blatantly manipulative demands, the results may eventually have some positive effects on Ukraine's economy.

Reminiscent of the high-handedness of Tsarist times, Russia recently increased the price that Ukraine should pay for Russian gas from the initially proposed $160 per 1,000 cubic meters to $230, which is actually a 460 percent increase over the $50 per 1,000 cubic meters that Ukraine is paying now.

At present, the war of words and initial actions continues and Ukraine has asked for intervention from several courts and governing bodies. Nonetheless, the crisis is bound to have some positive developments for Ukraine from several different perspectives.

First of all, the crisis should solidify President Viktor Yushchenko's political position and may actually assist him, and his political parties and allies, in the upcoming March elections. We in the United States have seen many times how a crisis can actually unite people in a common cause when faced with outside threats. Ukraine has already shown that it can unite under a collective struggle when provoked. The magnitude of Russia's obvious manipulations cannot be dismissed as simple business tactics. Russia wants Ukraine to give up its sovereignty the way Belarus did, and for that Russia is willing to dole out welfare crumbs until the next Ukrainian attempt at independent thinking.

The second and even more beneficial effect of the crisis will be the long-postponed introduction and development of conservation measures by Ukraine's industries.

A continuing study last updated in January 2005 by the Energy Information Administration (EIA) of the U.S. Department of Energy indicated that "Ukraine has one of the highest levels of energy intensity in the world." As far back as 1995, studies by other agencies, this time from the European Union, have shown that Ukraine uses approximately four times more energy than France for the same amount of output. Also, a 2002 study by the EIA showed that Ukraine had almost a seven times higher energy intensity factor of 1,000 of BTUs per dollar than the United States.

During its 14 years of independence and cheap Russian gas and oil, Ukraine has not had much incentive to introduce conservation measures. Now it will be forced to do so.

Another positive factor may be the anti-Russian sentiment that could develop if and when Ukrainians start feeling the real effects of the gas shortages. It's unlikely they will complain against Mr. Yushchenko, Yurii Yekhanurov or Yulia Tymoshenko when their apartments grow cold. Instead, their common enemy will now become the country that created the gas shortage in the first place.

Long-term positive factors will be the development and proliferation of alternative energy sources such as nuclear, solar and wind power. True, the Chornobyl nuclear disaster will continue to be on the minds of all Ukrainians, but with assistance from the United States or the EU, safer and more efficient nuclear plants should help ease these concerns. Alternative energy is a major issue around the world and very much so in the U.S., which has started developing such resources.

Already there have been a number of inquiries from Ukraine into alternative energy utilization methods such as corn-burning furnaces and stoves, which are not only efficient but, considering that Ukraine has huge agricultural sources, could prove to be a blessing. Other alternative energy sources about which inquiries were made were wind turbines, solar panels and bio gas.

The EU will also have to come to terms with the Ukrainian issue. It will have to decide whether to support Ukraine as a potential future member and speed up its assimilation process, or to abandon Ukraine to the Russian wolves. Given the slow process and indecisiveness that the EU has shown toward Ukraine in the past year, this is the least important of the positive effects, but it remains one that should be pursued continuously by Ukraine's politicians. It is the squeaky wheel that gets the oil (pardon the unintentional pun).

Last, but certainly not least, it would also be a positive development if the U.S. would finally recognize Ukraine as a real friend, partner and buffer against the Russians. One can never fully trust the United States' foreign policy, which has been misguided at best and often destructive at other times - but, perhaps, with the guidance of our Ukrainian diaspora activists, this can provide a positive impetus for the Ukraine's future.

Dr. Walter Prochorenko is currently director of publications at the Ukrainian National Association. His previous experience consists of over 30 years as a multi-national entrepreneur, wealth management advisor and business consultant in international business. Part of his business experience consisted of establishing and running several successful development businesses in Ukraine for a period of over eight and a half years. Dr. Prochorenko obtained his Ph.D. in international business and wrote his dissertation on the economic and political situation of Ukraine since independence.

| Home Page |