Gazprom - Naftogaz Ukrainy Dispute: Business or Politics?

Analysts felt that apart from economic aspects, there were many political aspects to the dispute. Some claimed that the sudden increase in gas prices - more than four times what Ukraine was paying, was the Russian way of punishing Ukraine's newly elected government for pursuing pro-West policies and for deciding to join NATO and the EU. Others alleged that Russia wanted to discredit the government in the parliamentary elections to be held in March 2006. But some analysts disagreed with the view that Russia was punishing Ukraine. They felt that with Ukraine deciding to leave the Russian orbit of influence and becoming a market-oriented economy to join the EU, Russia's obligation to maintain the Ukrainian economy by supplying heavily subsidized gas was also void.

The Gazprom - Naftogaz dispute brought to light EU's dependence on Russian gas. With a quarter of EU's gas consumption needs met by imports from Russia, EU member countries realized the need to diversify their energy imports. While a part of their gas requirements were met by member countries' domestic production, for a major share of its consumption it had to depend on imports. In terms of imports, Russia accounted for 40%, Algeria - 30% and Norway - 25%. EU members were also planning to build more storage tanks and increase the capacity of the existing ones to utilize them in times of emergency...