Gas-powered games

The New Year has gotten off to a bad start for the world, and it isn?t just terrorism or the proliferation of weapons of mass destruction that?s keeping countries on edge.

The New Year has gotten off to a bad start for the world, and it isn’t just terrorism or the proliferation of weapons of mass destruction that’s keeping countries on edge. The fractious row between Russia and Ukraine over gas prices suggests that energy sources could likely trigger tension and conflict among nations. Russia’s decision to switch off gas supplies to Ukraine last Monday follows months of wrangling about new pricing and transit rights of Russian pipelines through Ukraine. Russia wants Ukraine to pay world market rates for gas it receives from Russia, instead of the subsidised price under a barter system left over from Soviet days. But Kiev says it needs time and threatens to play hardball the same way Moscow does by charging Russia market rates for the use of gas pipelines in Ukraine for shipping gas to Europe.

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Moscow’s move does smack of politics more than economics. The way Russia recently made a deal with Turkmenistan — Ukraine’s biggest gas supplier — to buy up Turkmen gas, apparently only to limit Ukraine’s options. This is not surprising as relations between the two countries have been strained since Ukraine’s Orange Revolution in December 2004. At the time, Moscow overtly tried to prevent the pro-Western Yushchenko from becoming president and reorient Ukraine towards Nato and the European Union. Interestingly, Moscow’s latest weapon is natural gas, which has been increasing its profile as a fuel of choice: safe, reliable, a highly efficient source of power generation and cheaper to produce than oil. Switching from high-carbon coal to low-carbon natural gas is an excellent alternative for countries like India.