MOSCOW -- Russia settled its standoff with Ukraine over natural gas prices yesterday and planned to resume gas shipments to its western neighbor, ending a crisis that raised strong doubts in the West about Russia's reliability as an energy partner.
The breakthrough, reached during overnight talks between the two countries' state-run gas companies, came three days after Russia shut down natural gas delivery to Ukraine. The move brought sharp reductions in Russian gas sent to Europe via Ukrainian pipelines.
The decision to shut down gas to Ukraine in the middle of winter created strong concerns in Europe and Washington about Russia's use of its energy resources as a political cudgel against other governments. Analysts say Russia's move was driven by the Kremlin's disapproval of Ukrainian President Viktor A. Yushchenko's efforts to draw his country closer to the European Union and NATO, and away from Moscow's influence.
Criticism of Russia's handling of the gas crisis comes at a particularly sensitive time for the Kremlin, with Russian President Vladimir V. Putin assuming chairmanship of the Group of Eight leading industrialized nations this year. The G-8 will have energy security at the core of its agenda this year.
"Russia wants to be regarded as a pillar of the G-8, a major player in the world economy because of its energy resources," said Viktor Kremenyuk, an analyst with Moscow's Institute of USA Canada Studies. "But as a result of using gas supplies as leverage against Ukraine, they've created much doubt about this potential role."
In the past two years, the Kremlin has methodically regained control over Russia's oil and natural gas resources, which collectively make the country the world's largest energy producer. Russian officials gutted Russia's largest oil company, Yukos, and transferred its core production unit to Rosneft, a state-owned oil company overseen by a top Putin aide. This year, the Kremlin raised its stake in Gazprom, the world's largest producer of natural gas, to 51 percent.
Gazprom justified this week's shutdown by saying that Ukraine refused to switch to market pricing and pay a fourfold rate increase, to $230 for each 1,000 cubic meters. Ukrainian officials wanted a gradual transition to market pricing and accused Russia of using gas prices to punish Kiev's post-Orange Revolution, pro-West government.
