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Unreliable Partners.(ISSUES & INSIGHTS)(EDITORIALS)(Editorial)

Investor's Business Daily

| January 04, 2006 | COPYRIGHT 2006 Investor's Business Daily, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

Energy: In the midst of a brutal cold wave, Europe has strong reasons to be worried about Russia's brief shutdown of gas supplies over the weekend. So, for that matter, does the U.S., though oceans and continents away.

It's a little disconcerting when a top energy supplier decides to cut you off in the middle of a record cold spell. Europe is finding this out, just as the U.S. did in the 1973 oil embargo.

How did this happen? Russia says that Ukraine is underpaying for natural gas and has halted shipments to force it to pay more. Since Europe gets about 20% of its natural gas from Russia, and nearly 90% of that flows through Ukraine, it too was cut off.

Though Russia has since backed down and said it intends to boost supplies to the rest of Europe, the damage has been done. Europe now realizes it's just one contract dispute from being cut off from a major source of energy. Not very comforting.

But this is more than a contract dispute. Russian President Vladimir Putin was humiliated a year ago by the Orange Revolution in which Ukraine replaced Soviet-style order with a market-friendly regime seeking closer ties to the EU, NATO and U.S.

The gas cutoff was Putin's payback, but that's not how Russia has spun it. It notes Ukraine pays just $50 per 1,000 cubic meters of gas under its current contract. Russia would raise that to the same level as the rest of Europe -- about $240 per 1,000 cubic meters.

Sounds fair. Except Russia's exceptions for other ex-Soviet satellites make it clear this is not a market adjustment, but punishment for Ukraine. Pro-Russia Belarus pays just $47; Armenia, Georgia and the Baltics -- all much closer than Ukraine to Moscow -- pay ...

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