VZCZCXYZ0000
PP RUEHWEB

DE RUEHKV #0208/01 0301403
ZNY CCCCC ZZH
P 301403Z JAN 09
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 7177
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHZG/NATO EU COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
RHMFISS/DEPT OF ENERGY WASHINGTON DC PRIORITY

C O N F I D E N T I A L KYIV 000208 SIPDIS DOE FOR LEKIMOFF USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYK E.O. 12958: DECL: 01/29/2019 TAGS: PREL ENRG EPET PGOV PINR UP RU EU

SUBJECT: UKRAINE-RUSSIA: POLITICAL ASPECTS OF THE GAS CRISIS REF: KYIV 204 Classified By: Ambassador William Taylor. Reasons: 1.4 (b,d). 

Summary ------- 1. (C) The December-January gas crisis, referred to by Ukrainian interlocutors as the gas "war," is the latest episode in a general downward trend in Ukrainian-Russian relations over the course of the past year. President Yushchenko, the Defense Minister and many others in the Ukrainian elite attribute the crisis to geopolitics, particularly Russia's desire to assert its regional dominance. The political elite seems to have reached consensus that only an emotional overreaction in Moscow could have led to a cutoff to Europe as well as to Ukraine. (Reftel describes Ukrainian views of Russia's role in the actual cut off of supplies.) Russia's primary objective, Ukrainian leaders believe, was to discredit Ukraine as a reliable partner, and gain commercial and political control of Ukraine's gas transit system. Prominent experts and observers highlight the importance of Putin's personal enmity toward Yushchenko; in particular, they note the irritant of Yushchenko's outspoken criticism of Russian military actions against Georgia. Prime Minister Tymoshenko has portrayed the outcome as a victory for Ukraine and emerged as someone with whom Putin could cut a deal. End Summary. Yushchenko: "Gas Means Politics" -------------------------------- 2. (SBU) The gas crisis is cast against the background of a year of growing tension in Ukrainian-Russian relations and the politicization of the bilateral relationship in the domestic power struggle between Yushchenko, PM Tymoshenko, and Party of Regions leader Yanukovich. While initial reaction from Yushchenko and his administration focused on criticizing the final contract negotiated by Tymoshenko in Moscow on January 19, this position has evolved. During his January 26-28 meetings with European Commission President Barroso in Brussels and in Poland with President Kaczinsky and Czech Minister for Foreign Affairs Topolanek, Yushchenko made clear that Ukraine would abide by the contract, despite what he sees as its disadvantages for Ukraine. On January 28, Yushchenko referred to the "myths cranked out by the Russian government or Gazprom", and noted Russian geopolitics were behind the gas crisis. "Gas means politics, while large amounts of gas mean big politics," he said, continuing that Russia's actions appeared to be aimed at discrediting Ukraine and obtaining political and commercial control of the Ukrainian gas system. DefMin: It was "All Geopolitics" -------------------------------- 3. (C) Defense Minister Yekhanurov told the Ambassador January 28 that the gas crisis was "all geopolitics." He said that Russia wants to be the monopoly supplier of gas in Europe. The Germans, he said, are "actively assisting" Russia in this. He described Ukraine as "the only gas transit system Russia does not control -- and they want it." It is, he stressed, in Europe's interest to preserve an independent Ukrainian gas transit system. Yekhanurov encouraged the US to emphasize to Europe how dangerous over-reliance on Russia is, and that a new energy strategy is needed. "Speaking personally," he said that one solution would be for Europe to buy gas at Ukraine's eastern border. 4. (C) Yekhanurov concluded that Ukraine had "lost the information war in December and January," noting that Russia has "twenty five times" the public relations capacity of Ukraine. He said Ukraine would welcome advice from the U.S. on how to build up its PR system to deal with such an onslaught. "A Hard Time" in Moscow ----------------------- 5. (C) Konstantin Gryshenko, Deputy Secretary of the National Security and Defense Council and Ambassador to Russia, told the Ambassador in a January 29 meeting that the gas crisis had further soured the already poor climate of bilateral relations. He confessed to be having a "hard time" in Moscow. "No one" in the GOR "wants to listen to the Ukrainian side of things." Gryshenko said that the Kremlin wants a "regency" - someone in power in Kyiv who is totally subservient. He noted that Putin "hates" Yushchenko and has a low personal regard for Yanukovych, but apparently sees Tymoshenko as someone, perhaps not that he can trust, but with whom he can deal. He observed that everyone in government seemed to be part of the "security brotherhood." People are afraid to tell jokes; it is "back to the USSR." Seeking to Control Ukrainian Gas Transit System --------------------------------------------- -- 6. (C) First Deputy Secretary of the National Security and Defense Council (NSDC) Gavrysh echoed to the Ambassador concerns about Russia's desire to gain control of the gas transit system. He noted that the inclusion of energy cooperation in the December U.S.-Ukraine Charter may have been an additional, and significant, annoyance prompting Russian overreaction. According to Gavrysh, the NSDC will attempt to take steps -- without abrogating the contract -- to protect the Ukrainian energy market from any further Russian expansion, and to avoid Russia gaining control of key industries through debt-equity swaps. Ukraine, he said, will be seeking U.S. and EU support to consolidate discussions around the strengthening of Ukraine's gas transportation system. "Emotional" Reaction in Moscow ------------------------------ 7. (C) After a year of bilateral irritations over natural gas, Georgia, NATO, the Holodomor and other issues, no one was in the mood to negotiate gas prices by December, according to Party of Regions MP and Shadow Economics Minister Iryna Akimova. When Yushchenko and Tymoshenko began to play the negotiations for their own political advantage, she said, the situation became emotional - in Moscow as well as in Kyiv - and Moscow overreacted. Prominent commentator Olexiy Haran told us that Russia's, and particularly Putin's, broader intentions are to discredit the principles of the Orange Revolution as well as broader Ukrainian nationalism, to compromise and divide the many political groups in Ukraine, to exploit differences among Western allies, and to serve Yushchenko a final defeat. In particular, Haran noted, Ukraine has reason to be concerned about what Tymoshenko might have bargained away in side deals during negotiations in Moscow. Moscow Sought "Total Capitulation" ---------------------------------- 8. (C) Deputy Editor in Chief of Zerkalo Nedeli (Weekly Mirror) and political analyst Yuliya Mostova told the Ambassador that the Kremlin clearly had commercial goals in the dispute, among them to solidify European support for Nord Stream and South Stream. However, political goals were also important. Her own discussions with Naftohaz head Dubyna indicated that Moscow expected "total capitulation." Putin was seeking to punish Yushchenko. Nonetheless, the ultimate goal was to discredit Ukraine as a transit partner, and gain control of the transit system. Mostova drew attention to the vulnerability of Ukraine's chemical and steel plants, which were not receiving enough gas to operate and were already suffering badly in the financial crisis. (Note. Shares in unrelated companies are often swapped for debt forgiveness with Gazprom.) 9. (C) Mostova noted Moscow may have thought its actions were legally and politically watertight. Since Europe can not get by without Russian gas, Russia could sue Ukraine for damages and losses and possibly win. She felt Moscow may have overestimated the success of its information campaign against Ukraine, however. "No Wedding Without Blows" ------------------------- 10. (C) Noting that the conflict (although not its extent) was foreseen, Presidential Deputy Chief of Staff Bezsmertniy told the Ambassador that negotiating with Russia is like a Slavic wedding: "it wouldn't be a wedding without an exchange of blows." Bezsmertniy, while claiming that Ukrainians would get by this time, said Ukraine needs to move to mitigate its own dependency through alternative sources/types of energy such as nuclear and coal, and through conservation in both industry and households. He was hopeful the crisis would spur a reduction in gas consumption and was not surprised that Russian tactics did not lead to upheaval in Ukraine. Comment ------- 11. (C) This latest, and surprisingly internationalized, squall in Ukraine's relations with Russia throws a sharp light on the downward trend in bilateral relations over the course of the past year. Concerns remain about the impact of the crisis on Ukraine's relations with Russia going forward. On the positive side for Ukraine, the gas war demonstrated that a cut off would not bring Ukraine to its knees; Ukraine was able to redirect its gas within its system and weather the storm. Yushchenko's occasional efforts to engage in the crisis with Russia proved fruitless. Tymoshenko appeared to have established herself as someone with whom the Kremlin could do business. Defense Minister Yekhanurov's sentiments about Ukraine losing the information war are widespread. Ukraine felt totally out-gunned by the Russian/Gazprom media effort. TAYLOR