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Russia 8216 using gas as coercion tool 8217 against Ukraine

Article By: ,  Financial Analyst
April 11, 2014 11:15 AM

Russia has been accused of restricting the supply of gas to Ukraine in a bid to coerce its neighbouring country as part of the military action between the two nations.

Washington state department spokeswoman Jen Psaki described the latest move by Russia – which has warned countries around Europe of possible gas supply cuts due to the debts owed to it by Ukraine – as a "tool of coercion".

Satellite images revealed by Nato this week showed that tens of thousands of Russian troops have been gathered on the country's border with Ukraine. Military forces have already been deployed in the Crimea region of Ukraine by Russian president Vladimir Putin and the area later voted in favour of becoming Russian in a swift referendum.

However, Russia denied that the satellite images are from the last few weeks and instead claimed the photographs were of a military training exercise held last year.

Russia's gas

Gas is a major weapon for Russia against both local rivals such as Ukraine and global competitors such as the US, as it is one of the world's biggest suppliers of the commodity. But the shale gas revolution in the US has restricted the country's reliance on imported energy.

Ms Psaki stated that the gas prices Ukraine is having to pay Moscow have not been set by market forces, while she also revealed Washington has been working with Ukraine to provide financing and help it to find enough gas to get by without Russian supplies.

She said: "Ukraine is now paying $485 (£298 per 1,000 cubic meters), a price clearly not set by market forces and well above the average price paid by European Union members."

Political upheaval started in Ukraine after thousands of protesters took to the streets of the country's capital city Kiev to protest about the government's perceived closeness to the Russian regime led by Mr Putin. Many Ukrainians would rather see their nation attempt to become a member of the European Union in the near future, rather than continuing to rely on Russia for supplies such as gas.

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