chapter  12
26 Pages

Russia’s CIS gas trade

An instrument of Russia’s hegemony?
WithDomitilla Sagramoso

This chapter examines Russia’s energy policies towards the CIS states during Putin’s first and second Presidencies. It shows how, under Putin, the energy sector took centre stage in Russia, with efforts being conducted to re-establish a single energy complex within the CIS space. The aim was to reverse the CIS disintegration trends in the energy realm and allow Russia to emerge as an influential energy power on the world stage, capable of conducting an independent foreign policy. The chapter argues that while Russia’s policies, to a certain extent, followed legitimate commercial interests, the instruments utilised by Russia to achieve its objectives – especially with regards to the acquisition of CIS energy assets, gas distribution and gas pipeline systems – did not always correspond to legitimate international practices. The chapter shows how, during Putin’s first term in office, the Kremlin generally engaged in benevolent policies and fair practices when negotiating energy prices and sales’ volumes . It then goes on to demonstrate how during Putin’s second term in office, Russia’s policies were instead characterised by a growing reliance on ‘hard’ coercive methods, in contravention of international law. Russia was able, in this way, to obtain control over coveted energy assets in ‘debt for equity’ swaps in several countries such as Moldova, Armenia and Belarus. More importantly, as this chapter shows, Russia increasingly utilised gas prices, and the dependency of countries such as Ukraine and Belarus on the delivery of Russian gas, as instruments of foreign policy to achieve specific political objectives, displaying, in this way a readiness to exploit its hegemonic position. The chapter, however, also shows the limits of Russia’s hegemonic power, as the country depended on several CIS states for the transit of Russian gas to European markets. Furthermore, CIS gas-producing states in Central Asia increasingly looked for alternative markets for the sales of energy products while gas-consuming countries such as Ukraine, Georgia and Moldova tried to diversify their purchases of gas away from Russia – and this significantly reduced Russia’s hegemonic reach.

This chapter also discusses Russia’s policies towards the CIS states in the energy field during the 2010s, and especially after Putin’s return to the Presidency in 2012. It argues that Russia engaged in quite assertive policies is area, in response to new global realities – reductions in the demand for Russia’s energy products (due to the global financial crisis), the development of shale gas, the fall in energy prices and the worsening of Russia’s relations with its European consumers. The chapter argues that while Russia succeeded in increasing its sales of gas to Armenia and acquiring additional shares in the Armenian distribution system, it eventually lost the Georgian gas market and also part of the Moldovan gas market. Belarus and Ukraine, instead, remained heavily dependent on gas purchases from Russia, and this created serious disruptions in the deliveries – a result of the difficulties experienced by these two countries to promptly cancel payments and meet the significant price increases demanded by Russia. The chapter also shows how Russia continued to utilise gas prices as instruments of pressure – either to acquire shares in coveted industrial and energy assets, to access local energy distribution system, to prevent the removal of private intermediaries from the energy business trade, or to reach specific political objectives in the countries concerned. This clearly indicated that Russia proved ready to exploit its hegemonic position in the energy field, in order to achieve both commercial and political objectives in the former Soviet states, including keeping these countries within Russia’s sphere of influence. The chapter also discusses Russia’s gas policies in Central Asia and reaches the conclusion that in response to Russia’s efforts to exploit its hegemonic position, in particular through its control over transit routes, Central Asian countries increasingly tried to diversify their export markets and come out of Russia’s sphere of influence.