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Hair Triggers in the Ukrainian Energy Sector

By Daniel J. Graeber | Fri, 27 April 2012 22:21 | 0

Four explosions went off Friday during the lunch hour in Dnipropetrovsk, an eastern industrial city in Ukraine and home to former Ukrainian Prime Minister Yulia Tymoshenko. The explosions occurred one week after the opposition leader went on a hunger strike to protest her prison conditions and the political situation in Ukraine. Recently, pundits have waxed prolifically about the link between oil and conflict in the troubled Sudanese region.  In eastern Europe, however, that crisis takes on a unique form in the way of natural gas.

Tymoshenko is serving a seven-year prison sentence at a penal colony in Ukraine. She was sentenced in October for charges related to a 2009 natural gas deal with Russian energy monolith Gazprom. Contractual disputes in 2009 encouraged Gazprom to cut off the gas to Ukraine, which left downstream consumers in Europe in the cold for weeks. Tymoshenko's deal broke that impasse, but at $400 or so per 1,000 cubic meters, it also bruised a Ukrainian economy already beaten down by the global recession.

On Friday, four bombs went off around lunchtime in Dnipropetrovsk, the former prime minister's home town. After working as an engineer at a missile factory in the industrial city, Tymoshenko went on to serve as the chief of the United Energy Systems of Ukraine, a company that helped bring Russian natural gas to Ukraine in the 1990s. The role earned her the moniker "gas princess" because of alleged kickbacks in the natural gas sector, which may or may not have been related to Gazprom. She later went on to serve as deputy prime minister for energy. In late 2004, she helped lead the country's Orange Revolution, three years after she was charged with smuggling natural gas from Russia.

Officially, authorities said the attack in Dnipropetrovsk was the mark of terrorists. Ukraine, however, doesn't have a history of terrorism and Tymoshenko's supporters said the attack was the work of a government working to deflect claims the former prime minister was abused in prison.

In 2007, Tymoshenko, in the annals of Foreign Affairs, called on the West to work to discourage Moscow from pursuing "age-old imperial designs" in the European energy sector. The gas crisis she helped resolve two-years later sparked a de facto energy war over the Kremlin's grip on the energy sector.  Europe is drawing its battle lines in the Azeri waters of the Caspian Sea while Gazprom busies itself building up its defensive positions with pipelines circumventing Ukraine.

Tymoshenko wrote in 2007 that "the real test of statesmanship is the ability to protect one's country against unfavorable and unforeseen contingencies." Her health is failing, her supporters say, and more than two dozen people were wounded in an attack on her home town Friday. It's hard to discern where things turned in Kiev and which way their headed as the country gets stretched in the east-west dynamic. Once you let your hair down, however, the fault lines of the Cold War are still plainly visible once you get a few pages into the story of capital reform in the eastern bloc.

By. Daniel J. Graeber of Oilprice.com

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