It's probably not too cold in Ukraine and Russia right now, because there's a lot of heated air being exchanged between the countries. Ukrainian prime minister Yury Yenukharov is refusing to pay the price for Russian gas, and this has broader implications for Russian defense programs. President Yuschenko has at least agreed not to threaten the Crimea naval base Russia leases for access to the Black Sea.

The Russians are even having problems with meat going through the country, while accusing Ukraine of planning to steal gas. Yesterday an important member of the Russian cabinet quit after angering Putin with comments like this,

He said that Dutch disease was replaced in Russia by Venezuelan disease and since then by Saudi disease. The economy has become rent-oriented, the development model is corporate and the regime undemocratic. ... Illarionov also for the first time made direct reference to the business interests of Putin's closest associates, saying that the heads of state-owned companies do not act in the interests of the state.

The Ukrainians, meanwhile, are starting to increase energy prices.

This pas de deux is a usual feature of post-Soviet relations between the two countries. But Anders Aslund and Adrian Karatnycky in the WSJ put this episode at a new level, and say it is meddling by Russia in Ukrainian affairs.

The Russian government makes sure that Gazprom maintains low prices of $48 per mcm for Moscow-loyal Belarus while Georgia and Armenia -- two other ex-Soviet republics with a more independent, pro-Western policy -- are to pay $110 next year. Indeed, if, as President Putin now insists, all this is a matter of economics, why has Russia eschewed quiet and pragmatic negotiations and been so vocal in fanning disagreement? There are three political reasons.

First, Russia seeks to influence Ukraine's March 2006 parliamentary elections by suggesting to Ukrainian voters that the current government in Kiev is economically incompetent and its pro-Western tilt harmful to consumers.

Second, the Kremlin seeks to discredit Ukraine's "Orange" government among Russian citizens in order to inoculate its population from the contagion of democratic revolution.

Third, Russia seeks to drive a wedge between Europe and Ukraine by painting the Kiev government as reckless and unreliable.

If Russia is trying to influence the Ukrainian elections, who does it wish to see come to power? The losers of the last election, the Kuchma-Yanukovych crowd? I doubt that. They will have no credibility. So perhaps it will be deposed prime minister Yulya Tymoshenko.

See also Vladimir Socor for a detailed analysis from last week.

This is a linky post that is meant to ponder, not draw strong conclusions, because it's anyone's guess. I am only drawing attention to the fact that this may be more than the normal jousting between Russia and its neighbors. Or it may be a lot of hot air that leads to nothing at all.

Categories: economics, Ukraine, politics