Gazprom - Naftogaz Ukrainy Dispute: Business or Politics?

After the disintegration of the Soviet Union, Russia, the largest republic, became the successor state to the Soviet Union, inheriting all its obligations and entitlements. Russia was not willing to give up its influence over the former republics of the Soviet Union. It agreed to supply gas and oil, apart from various other things, to the former Soviet Union republics at a highly subsidized rate and under favorable terms. This Russia did to keep the newly independent states from deserting it. It perceived a threat to its power and influence as well as to its security, if these countries joined the West and allowed their military bases to be used by other powerful countries.

In the 2004 elections to the Ukrainian Presidency, Prime Minister Viktor Yanukovych (Yanukovych) and ex-Prime Minister Viktor Yushchenko (Yushchenko) were rival candidates. Prime Minister Yanukovych was supported by the outgoing President Leonid Kuchma and also by Russian President Vladimir Putin (Putin). Yanukovych favored closer and better ties with his big neighbor Russia. Yushchenko on the contrary, advocated closer ties with the West and with the EU in particular. He was a champion of market-oriented economic reforms...