The continuation of the Russia-Ukraine gas conflict was marked yesterday by yet another attempt on the Russian part to send gas to Europe, which Ukraine blocked on technical grounds. The current object of debate is the transit route that the gas should take: Russia insists on the shortest and largest-capacity route, while Ukraine argues that it is unsuitable because it is currently being used in the other direction to pump gas to Eastern Ukraine from reserved stock in Western Ukraine. Consequently Russia argues that Ukraine is blocking its gas, whereas Ukraine accuses Moscow of hypocrisy, saying it is seeking control over its gas network instead. Deadlock ensued.

Two new proposals emerged yesterday to break the stalemate. One, by Russian Vice-Prime Minister Igor Sechin, supported by Slovak Prime Minister Robert Fico, is for Russia to send gas to Eastern Ukraine, and for Ukraine to direct its saved resources into Europe. Ukraine has indicated that it would rather receive up to 1,500 million cubic metres (cm) of "technical gas" until March to make pipelines operational, saying they would pay for it afterwards or return it, a promise to which Russian Gazprom gives no credit, demanding money upfront. Russian President Dmitry Medvedev, in turn, says that Russia is willing to offer Ukraine loans to cover expenditure on gas purchases, at a non-subsidised rate, however. The dispute quickly becomes a moot point, with no proposition or argument better than another, to the frustration of the European consumers who are suffering from its consequences.

Another resolution proposed by Moscow is to open up the conflict and turn it from a bilateral dispute into an international matter. Medvedev has offered to hold an international conference in Moscow at head-of-state level over the coming weekend, that would include all parties affected by the dispute. Russia's proposal, supported by Prime Minister Vladimir Putin during his current visit to Germany, is to establish an international consortium that would control gas transit and thus make it invulnerable to bilateral political disputes. The proposal is sound from a purely pragmatic point of view, but will surely hit sensitive spots in Ukraine, where any form of international control over national assets is seen as an attack on national sovereignty. So sensitive is the issue for Ukrainians that President Viktor Yushchenko has even refused to participate in a conference if it is held in Moscow. European Union (EU) leaders are considering it at the moment, with the necessity that they act carefully here—and in concert.

Outlook and Implications

Both Russia and Ukraine are in a no-win situation, in which they cannot agree to the demands of their counterparts but also suffer themselves from the continued conflict. While Russia is used to being blamed, Ukraine in particular is standing to get black marks on its previously Western-friendly reputation internationally, with the European Commission (EC) head Jose Manuel Barroso calling both countries unreliable partners. The conflict takes Ukraine farther away from the EU and NATO, to which it aspires, and places it on the same perception level in European eyes as Russia, to be wary of. Russia, however, has the advantage of a vast natural resource base and a large economy to fall back on, something that Ukraine cannot boast.

However much the European countries may try and stay out of the conflict, it also poses a challenge to the EU, that of its members taking opposing sides. The prime ministers of Bulgaria and Slovakia travelled to Moscow yesterday, where they reportedly showed aggravation with Ukraine, whereas the Polish President had laid the blame on the predicament onto Russia. Such division of positions is best avoided, for arguably the strongest chance of sustainable resolution of the conflict is indeed to bring in a third force with great authority that would see to both the transparency of the future and current gas deals and also to their implementation. At the current stage, however, it seems that the EU would like to keep out of the conflict as much as it can, calling for a bilateral solution instead. The latest piece of news is that Russian and Ukrainian prime ministers will meet in Moscow this Saturday. Hopefully they will produce something worth waiting for.