Unfortunately for those spinning this simplistic tale of bully and bullied, Gazprom’s ‘unacceptable conduct’ is actually something we have been requiring of it. For in raising the prices they charge for gas in Eastern Europe, the Russians are merely going part way towards meeting demands made by the European Union over several years. ~Paul Robinson, The Spectator
Given all this, Gazprom’s decision to charge market prices to Ukraine is, on the surface, one for which the EU should be congratulating it. It represents at least a small step in a general Russian policy towards liberalisation which has been slowly gaining pace over the past five years, in part due to EU pressure and in part due to the needs of the Russian economy. One of the problems of subsidies is that they distort economic behaviour, creating wastefulness and inefficiencies in the allocation of resources. Ukraine is not the world’s sixth largest consumer of natural gas because its industry requires such enormous consumption, but because its subsidised prices make it indifferent to energy-saving. Paying more for its energy might actually do it some good.
In short, the increase in gas prices is fully in keeping with the West’s desire to complete the process of creating a genuine market economy in Russia, Ukraine and the other countries of the CIS, as well as progressing towards fulfilling the environmental demands of the Kyoto accord. It is an entirely welcome gesture from the perspective of any free-market economist, not to mention any environmentalist.
From the way the Gazprom price changes had been reported in the West, one might be forgiven for thinking that the Russians were just playing a bit of hardball with those countries that had started tacking towards the West by reducing the level of subsidy while ‘loyal’ countries were to be rewarded with even more heavily subsidised rate. But the important point of the story is always missed: Russia is reducing the level of its subsidies in the Ukraine when it demands higher prices, which means that the Russian state will in the long-term have less control over its neighbours and, theoretically, competition in the European energy sector should increase. Of course, the short-term price hikes and the consequent pain felt in the affected countries are probably also intended as punishments of neighbouring states whose elites have stupidly pursued a pro-EU, pro-NATO course regardless of the actual interests of their countries, but contrary to the views of American pundits the Kremlin is capable of slightly more sophisticated policy than crude intimidation of smaller countries (for the most part, the Kremlin leaves this sort of thing to Washington these days).
As it happens, it would appear that this is one of those occasions where adjusting energy prices closer to market levels (which should make market-lovers thrilled, right?) also happens to give Russia a temporary advantage and provide it some leverage against its neighbours. This is what independent nations do with their advantages in natural resources, and it is what we might expect in an international market. If I were a hack of Wall Street Journal standards, I would say something dismissive like, “Markets are messy.”
But instead of approving of the Russian state bringing Gazprom more into line with international price standards (and thus actually loosening their artificially strong grip on the energy sector), as we might expect real friends of market economics to do, there has been unabated breast-beating and moaning about Russian perfidy and imperialism, etc. These are usually the same people who warned Russia against interfering in the Ukrainian election while cheering on the American-backed agents who were busily interfering in it. But of course the Russians didn’t mean well with their interference. As the British soldier said of the Germans in the classic anti-imperialist Australian film Breaker Morant, “They lack our altruism, sir!”
Some Westerners complain about Gazprom and the rate hikes because it suits them to attack President Putin, who has become for mysterious reasons a hate figure second-to-none in the establishment press in America and Britain (I guess the only thing worse in the pundits’ view than a feckless foreign leader is a moderately competent one), but if the shoe were on the other foot and it was an approved, “democratic” state turning the screws on an “authoritarian” regime “we” would be loudly applauding the policy and contemplate doing the same thing ourselves to various dictatorships.