New Cold War

In Ukraine, Winter Is Coming

Once again Russia brandishes the threat of a gas cutoff to squeeze Kiev and coerce Europe. Folks are taking cold showers already, and the weather soon will be glacial.

09.23.14 9:55 AM ET

MOSCOW — Fur coats may well be in high demand this winter among those glamorous ladies in Ukraine who can afford them. But many others will be happy just to get a hot shower before bundling up in their icy apartments.

Once again, the Kremlin is threatening its trouble neighbor with a long-term cutoff of gas supplies, and already there are signs that as the weather gets colder, Russia is pumping less gas, not more, through the pipelines to Western Europe.

The pro-European Revolution that erupted last November, the conflict with Russia and the loss of the Crimea, a new civil war, and refugee and economic crises over the summer weakened the hands of President Petro Poroshenko and other proven advocates of European values in Ukraine. Now they hope that their powerful neighbors to the west will not let them freeze, literally, in what feels more and more like the beginnings of a new Cold War.

If Russian President Vladimir Putin decided to punish Ukraine for disagreements about the cease-fire, or for not paying what Russia claims is a $5 billion debt for gas, Gazprom could launch a punitive action not only against Ukraine but the European Union. And some in Moscow think this is only fitting. “We are not cruel, of course,” Duma information committee member Vadim Denging told The Daily Beast in an interview at the Russian parliament earlier this week. “We would not let our brother Slavs freeze to death, but it is time for the Ukrainians to grow serious and get rid of Poroshenko’s criminal team in power, otherwise life in Ukraine will be a nightmare.”

The latest gas conflict between Russia and Ukraine has been developing for months, since the war in eastern regions of Ukraine reached its peak. Early in the summer Russian national company Gazprom cut gas supplies to Ukraine, demanding the Ukrainian energy company Naftogas pay Gazprom $5 billion for the gas Russia supplied in 2013. By the end of summer, Gazprom was hinting that if Ukraine could not pay in cash, “other non-monetary forms of gas payment could appear,” meaning shares of the Naftogas company or ownership of gas pipelines. That is a non-starter in Ukraine today, where nationalism is more fierce than ever since the annexation of Crimea and the separatist war in Donbass.

Meanwhile, ordinary households in Europe depend on the developments in the Russian-Ukrainian conflict, as more than half of Russian gas supplied to European countries travels through Ukraine. Earlier this week, the Ukrainian prime minister, Arseniy Yatsenyuk, warned Europe about the difficult situation in Ukraine’s energy sector: “We know of Russia’s plans to block gas transit even to European Union countries this winter, and that’s why E.U. companies were given an order to pump gas into storage in Europe as fully as possible,” according to Yatsenyuk.

It was not an emergency situation, yet, but last week several European countries noticed a decline in gas deliveries from Russia. Both Slovak and Austrian gas experts reported the flow of Russian gas dropping 20 to 25 percent. In the past decade, Ukrainians had experienced several gas disputes with Gazprom. This year, Ukraine could not afford to pay the price the Russian monopoly set for Naftagaz, which is far higher than what most European countries pay, and twice the price Gazprom charges domestically in Russia. Ukraine refused to pay, and the conflict festered. 

In the worst scenario, Ukrainian authorities ordered municipal utilities to turn down communal hot-water facilities to save on gas. The owners of private apartments quickly purchased boilers and electric heaters.

“One thing they still don’t get about Ukrainians is that it’s possible to kill us all, but at this point nothing, even the most serious gas blockade, will force us onto our knees,” Irina Kovalchuk, a real estate manager, told The Daily Beast in a recent interview in Kiev.

Was Gazprom or the Russian economy benefiting from its gas dispute with Ukraine? The conflict in Ukraine caused Gazprom to cut production volumes from 496.4 billion cubic meters to 463 billion cubic meters. At same time, Gazprom’s  domestic competitors, Rosneft and Novatek, managed to grab a part of Gasprom’s profit in the Russian market. “The pie becomes smaller and independent players grow more aggressive,” said Konstantin Cherepanov, an analyst with UBS bank. With days growing colder both Ukraine and European nations hope for a resolution to the dispute with Russia at the gas talks that are scheduled to restart in Berlin on Sept. 26.