The 2006 Russian-Ukrainian gas crisis - causes and potential for repetition

This report discusses the causes of the January 2006 Russian-Ukrainian gas crisis, and analyses the potential for a repetition of the crisis at a later date. This topic is of interest not only to Russia and Ukraine, but also to gas consumers in Europe who depend on stable deliveries of Russian gas through Ukraine. The crisis caused considerable concern in Europe, put diversification of energy imports firmly on the political agenda, and blemished Russia’s reputation as a dependable energy exporter. After an initial presentation of the main facts surrounding the crisis, the report takes a closer look at how the two sides interpreted the conflict. Then comes a broader examination of the role of energy in Russia’s foreign policy, before the report ends with an assessment of six factors that the authors consider the most important for whether a similar crisis might be repeated in the future or not. These six factors are: (1) degree of Ukrainian gas dependence on Russia; (2) to what extent, and how quickly, Russia is able to substantially reduce her dependence on the Ukrainian pipeline system through the construction of alternative pipelines; (3) the importance of the European market in relation to other gas markets (China, India and others); (4) the ownership structure of the Ukrainian pipeline system, whether it remains Ukrainian, becomes joint, or becomes Russian; (5) the general mood in EU-Russian relations and (6) the general mood in Ukrainian-Russian relations. The authors conclude that a repetition of the crisis is not very likely in the short term, but that developments within the six factors can make a repetition much more likely in the longer run.