Anniversary of Anguish over Bronze Battle

This weekend past saw the first anniversary of the Estonian Bronze Soldier crisis - over the removal of a soviet WW II monument from central Tallinn. As the crisis evolved it ignited a bilateral quarrel between Tallinn and Moscow, in the end setting Russia and the European Union at loggerheads. As the first anniversary of the Bronze battle drew close, a certain extent of anguish and apprehension arose among Estonian authorities. What was to happen this time over? The simple answer was - next to nothing.

On Saturday, some 100 demonstrators gathered in a park in central Tallinn to commemorate last year's events, and to call for the resignation of the Estonian government led by Andrus Ansip. The event was peaceful and heavily monitored by police and the Estonian secret service (KAPO).

That the demonstration actually rallied less of a crowd than the number of people merely injured last year must be considered a fundamental failure for Russian "minority" interests in Estonia. Not least so as, just a few weeks ago, an organization to unite Russians in Estonia held its first congress. That Saturday's demonstration had such a poor showing may thus point to a waning significance of the Russian issue in Estonia. Or should perhaps alternative explanations be sought?

What evolved over a few weeks last spring was that the same methods used during the coloured revolutions in Serbia, Georgia, and the Ukraine, were now applied by Russians themselves. As the protest was reaching its crescendo, actions and debate were coordinated by sms, e-mail, and blogs targeting largely unprepared Estonian political leaders and authorities. The subsequent cyber attacks on Estonian web-servers proved the peak in efforts to paralyze society. Someone had obviously done his homework.

In terms of the Russian-speaking population of the Baltic States, Russia has long propagated that these "minorities" are consistently discriminated against, and has even ventured so far as to compare the situation with Apartheid. Last year's events also gave Moscow an opportunity to highlight the issue on the international scene. Although much of recent bravado has mysteriously evaporated, Russia has e.g. demanded an addendum on the Russian minorities in Estonia and Latvia in ongoing negotiations on a new Partnership and Cooperation Agreement with the European Union.

Still, much indicates that Moscow came out of the 2007 conflict with the EU on the wrong end of the stick - besides the PR-fiasco for Moscow's international image - why such demands are most likely to be ignored. Also, Russian policy towards the Baltic States since 1991 has largely proven a failure. Already in 1997, Russia's Council for Foreign and Defence Policy - an influential think-tank - in a report characterised Moscow's policy as counterproductive, if it intended to safeguard the interests of Russian "minorities".

It is far too seldom argued that what is not said and done may be as interesting as what actually is. So may be the case also here, although reporting on something that did not happen - as the Bronze battle anniversary - would hardly qualify as breaking news or of interest to a larger audience.

Turning to the case in point, the Bronze Soldier crisis has fundamentally been interpreted as an ethnic conflict. In fact, few issues are as politically sensitive as ethnic tension. Recent history has witnessed oppression and even genocide on minorities to an extent that has shocked world opinion. However, this also has made us prone to see far too many societal conflicts with ethnic lenses.

So, why did the anniversary of the Bronze Soldier crisis pass by next to unnoticed? May it be that there are alternative or complementary explanations to last year's turmoil than the ethnic angle? Before trying some hypotheses, it should be clearly stated that the removal of the Bronze Soldier from central Tallinn unequivocally was the igniting factor of the 2007 crisis. It is quite obvious that the Estonian government acted in haste and with poor judgement. Thus, they partly brought the crisis upon themselves.

Still, that does not explain the absence of protests a year after the so far largest protests by ehtnic Russians in post-soviet Estonia. The situation has not altered and the reasons for, arguably, Russian discontent with conditions in the country has not changed for the better - rather the opposite as a fact. Political forces traditionally safeguarding interests of Russians have partly been rendered obsolete. In socioeconomic terms, nothing has really happened, as illustrated in a report by Marju Lauristin last autumn.

So, except for Estonia's monumental mistake and obvious Russia-related explanations of lacking protests this year - the upcoming presidential installation on 7 May and last year's domestic need in Russia to rally around a cause - what might serve as alternative or complementary hypotheses for the difference between last year and now?

One reason largely unexplored is the transit of Russian goods and products through Estonia. Russia has long wanted to divert this trade to Russian harbours instead of having to pay the costs of transit. Furthermore, Kremlin-sponsored Russian companies had long been eager to out-compete those companies that controlled and profited from the Estonian transit trade. The same applied for control over export-harbours in Estonia. For most observers, it serves as no surprise to state that the transit trade involves enormous sums of money. One can only imagine how much by pointing to the fact that Estonia lost some 6,3 billion Estonian Kroonas in transit revenues due to a few weeks of Russian blockade.

Consequently, just a week or so before the April 2007 events, Russian vice Premier, Sergei Ivanov, held a speech in Murmansk, in which he propagated curbing transit trade and diverting Russian exports to ports in the Petersburg region and Gulf of Finland.

Negotiations for transit quotas and pricing on Russian goods by Estonian railway were to be held in May 2007. In 2006, the Estonian state re-nationalized Estonian Railway (Eesti Raudtee), why preconditions for influencing the outcome of negotiations had been altered to the detriment of Moscow's interests.

As for harbour facilities, the ports of Tallinn and Muuga represented around one-quarter of Russia's total refined-product exports, thus by far outweighing any Russian harbour. Control over harbours in Tallinn, Muuga and Sillamäe had long been coveted by Russian business interests. As previously reported, last year's crisis also saw a transfer of trade between these ports to the benefit of Russian interests.

Then, there is also the question of shipping. The crisis and the subsequent Russian trade blockade is said to have favoured shipping operations, controlled by Swiss-based Gunvor Group. Gunvor is owned by Swedish oil trader Torbjörn Törnqvist, with interests in e.g. Surgutneftegaz. In November last year, Russian political scientist Stanislav Belkovsky made allegations in the German newspaper die Welt that Putin had amassed a personal fortune of some 40 billion USD, and that part of this was held by a 50% share of the Gunvor Group.

Although these rumours and allegations cannot be corroborated, and in fact have been denied by most concerned parties - among others Törnqvist himself - one cannot but stop to wonder what role business with a Russian stake had in the 2007 Russian-Estonian crisis. The example of controlling the transportation system - railways, harbours, and shipping - of Russian exports by way of Estonian transit might thus arguably be one alternative or complementary explanation to why last year's Russian-Estonian crisis was allowed to escalate to the level it did.

Russia's imposition of a trade blockade on Estonia for a few weeks last year was a hard hit on the transit trade. The transport of Russian goods by rail, road, and boat was halted. The companies involved in this line of trade, were among the all too evident losers, and many of them were more or less put out of business - both Russian companies and Estonian with often large Russian ownership interests. These companies were not sponsored by the Kremlin. Instead, it appears that the blockade wiped out annoying competition, and that mightier Russian business interests moved in to take over the transit trade, once the blockade was lifted. Such methods would not be a novelty in Russian business practices and thus serve to surprise nobody. Big business in Russia regularly gets Kremlin's blessing to move in and wipe out competition in order to monopolise a market. The difference in what would arguably be the Estonian case, is that these practices were now applied on another state not in the CIS, but on a member of the European Union.

So, apart from speculations and conspiracy-theories that normally surround events such as the Bronze Soldier crisis, it would seem worthwhile to test such alternative or complementary hypotheses as accounted for above. Who stood to gain from a blockade halting transit trade, and who has actually done so? However, if proven right, such an argument would not only expose that the Kremlin serves its own interests, but also a blatant disregard by Russia for the interests of the Russian "minorities" in the Baltic States, because the greatest losers of the conflict would turn out to be the very same Russian minorities that Moscow claims to defend.

Consequently, it may actually have been the Russians in Estonia who lost most out of the Russian-Estonian conflict over the removal of the Bronze Soldier. Russians were hit by losing the revenues from transit trade, both in terms of profits and employment. Furhtermore, Russians were the ones who were most exposed by raising the issue of disloyalty to Estonian society as a whole. For any minority in any country, such cross-pressure may prove highly detrimental to their future prospects of finding a place in society in social, economic and political terms, and still Moscow decided it was worth to run this risk.

Perhaps, in the end it is safest not to test such hypotheses as forwarded above, because - if validated - they would bring the perceived cynicism of Russian leaders to new and even higher levels. Moscow's indignation and heavy hand towards Estonia was officially motivated by the public outcry among Russians over the removal of the Bronze soldier. General opinion held that Moscow now finally had to step in to protect the Russian "minority" in Estonia. In stark contrast to this official policy, a proven transit trade hypothesis would - to the opposite - paint a picture of Russians abandoned by Russia and their cause sacrificed for the sake of petty business interests. One cannot help but wonder what the Russians who took to the streets in both Tallinn and Moscow in protest against "fascist Estonia" would think if confronted by proof to that effect. In the meantime, such hypotheses are, of course, just a fidget of one's imagination - or are they?

A Bursting Baltic Bubble?

Are the Baltic states facing an impending economic crisis? So seems to be the case, due to the current overheating of both Estonian and Latvian economies. Earlier this week, Standard & Poor's as well as Deutsche Bank warned that Latvia's economic imbalances might cause a currency devaluation. Estonia risks a similar fate in the runup to its 4 March parliamentary elections. Only Lithuania seems to be getting off scot free.

In January, Standard & Poor declared Latvia Europe's "most dynamic economy in 2007" with a GDP growth of 8.9%, and with neighbouring Estonia coming in second, with a 7.5% growth. Estonia and Latvia - along with Slovakia - are the fastest growing economies in Europe.

Growth, however, has a price. Both economies are facing an inflationary spiral with most economic indicators going wild. In the battle over customers, Latvian banks have lended money to consumers at an interest lower than the inflation rate, and Estonian banks have followed suit.

However, Latvia's problems are the most acute. Since January, economic growth has risen to 11%, by far exceeding the 6-7% that are long-term economically sustainable. High domestic demand and corporate investment rates add to the problems. The increase in imports - clearly over what the country exports - has also created a worryingly negative balance of trade.

As for the labour market, supply cannot meet demand as many Latvians work abroad. The annual wage-rises of an average 10% have so far been compensated by a corresponding growth in productivity, but this year the tendency is towards an impassable 20% rise.

What may really topple the economy, however, is the negative real interest rate combined with a high rate of public lending - largely in euro-loans. According to some sources, this has caused prices of real estate to double in recent years.

All in all, if Latvia were now to devalue its currency - the Lat - banks would be forced to compensate themselves by a drastic increase in interest rates. With loans largely in foreign currency, consumers would face acute solvency problems, potentially with a consequent crisis for the banking system. As it appears, recession seems to stand at the door.

So, what has the Latvian government done to curve inflation and battle economic overheating? Precious little, one must admit. Already last spring, Standard & Poor predicted several years' delay for Latvia's inclusion into the eurozone, postponing it for 2009-2010 at the earliest. Prognosis was based on sustained price growth, driven by demand and rising inflationary expectations. This, in itself, should have been a clear stop-sign for the Latvian government.

All the same, the Latvian economy is basically in good shape. The country's foreign debt is low and the state economy is under control. And, obviously, economy is booming. So, why waste a winning concept, seems to have been the reasoning of the government. Some measures have been made, but they have either failed or been dubious as for their effects.

Also, it is quite obvious that the government had had more reasons to be content. In October, the government coalition, led by conservative People's Party (Tautas Partija) leader Aigars Kalvītis, was the first to be re-elected since the country regained independence in 1991. No wonder the government had a laid back attitude to developments, wanting to enjoy its honeymoon with the voters as long as possible.

However, now the government has come to a rude awakening, as the situation has quickly gotten out of hand. The question is if it will dare to challenge the banking and financial sector, which - as in Estonia - belongs to its key support groups. It is questionable if the Kalvītis cabinet can rise to the challenge. In the meantime, the fear that the Baltic bubble bursts will linger on.

Estonia: Battle by Bronze Proxy

Why is it that a WW II-monument repeatedly sparks bilateral crises between Estonia and Russia? This question has, in recent days, gained new relevance after strong Russian reactions against the Estonian parliament's decision to remove the so called Bronze Soldier (Pronkssõdur) soviet war monument from central Tallinn. The reason is simple: The Bronze Soldier has become a proxy for the conflict between Estonian and Russian interests in Estonia before the 4 March parliamentary elections. The Estonians thus vage a battle by bronze proxy.

It is becoming increasingly clear that Edgar Savisaar's Centre Party (Keskerakond), will stand as victors on election day, ousting the coalition government led by Prime Minister Andrus Ansip's Reform Party (Reformierakond). Such a result risks toppling the delicate balance between western financial interests, dominating the Estonian banking system, and Russian interests controlling the lucrative transit trade, with far-reaching consequences for domestic and foreign policy.

Economic interest has been one of the main driving-forces in Estonian politics since the country regained its independence in 1991. A division of labour was developed roughly between two opposing groupings - the Russians controlling transit trade and backed by Moscow, and the Estonians controlling the financial and banking sector and backed by western - mainly Scandinavian - interests. This is reflected also in politics. Thus, Savisaars Centre Party has gradually become Moscow's agent, with heavy economic backing from Russia, to the point that the party actually has entered into union with Russian power party United Russia (Единая Россия). Savisaar's main opponent, the Reform Party, is to the contrary linked to finance and banking dominated by western business interests. A final peculiar twist to the matter is that these two main contenders for political power in Estonia, in fact form the current coalition government, together with the People's Union (Rahvaliit).

It is obvious that the the Bronze Soldier crisis this time is a desperate attempt by the Reform Party, facing potential defeat, to gain votes by shedding light over the close relations between the Centre Party and Russia. So, who are the major players in Moscow's relations with Estonia? On the Russian side, two names stand out as safeguarding these interests, namely Gleb Pavlovsky, one of Russia's foremost "political technologists," and Igor Levitin, Russia's Minister of Transportation. Pavlovsky gained wider international attention in 2005, due to allegations of involvement in the dioxin poisoning of Ukrainian president-to-be Victor Yushchenko. As for Levitin, Savisaar the other year unsuccesfully tried to grant him Estonian citizenship due to his great services to the country.

Then, what is actually at stake for the upcoming elections? Estonia is currently struggling with an overinflated rate of public lending - a financial bubble that could easily burst in face of any radical change of power in Tallinn. If Savisaar's Centre Party would win on 4 March, this might well be the spark to set off a major financial crisis in Estonian economy. As the Reform Party relies on the finance and banking sectors that constitute the lenders, such development would be catastrophic to the party, and potentially topple the fragile balance of power within Estonian politics and society. Moreover, it would hit hard on the western investors, forming Estonia's link to European economy. Therefore, the Reformists now are desperate to undermine the Russian interests forming the power base for Savisaar's Centrists. Thus, the Bronze Soldier crisis must be seen as an attempt to provoke sanctions from Russia, which would hit the very transit trade that forms the basis of Savisaar's Russian backing.

As the Estonian parliament (Riigikogu) this morning decided to move the Bronze Soldier monument, the country's president, Toomas Hendrik Ilves, was quick to declare that he would not sign such legislation, claiming it to be in breach of the constitution. In this context, one must ask whether it really was necessary for the parliament to pass a law on the removal of the Bronze Soldier. If this really was the intention of the Reform Party, could it not have been easier accomplished by a simple government decision? From this perspective, it is quite obvious that the Reformist ulterior motive was to provoke a crisis with Russia that would benefit the party for the upcoming elections.

So, what have been the reactions in Moscow? Russian Foreign Minister, Sergey Lavrov, was quick to characterise the decision as a "grave mistake" and as a "blasphemous act." Also, the chairman of the Russian Duma's foreign relations committee said that the decision would have catastrophic consequences for Russian-Estonian relations, especially trade and economy, thus hinting at exactly the effect the Reformist Party wanted to achieve. However, Estonia's ambassador to Moscow, Marina Kaljurand, was quick to point out that Russia would be unlikely to impose bilateral sanctions on Estonia, not wanting to risk a "trade war" with the European Union. What will actually come out of this is yet to be seen, but it seems that Russian politicians would be shrewd enough to call the bluff. Still, Russian-Estonian relations have been shaky for long, as previously reported, so it is difficult to say what will come out of Moscow this time.

Here one should instead direct more attention to an overseen foreign policy factor in the context of Russian-Estonian relations, namely the projected Russian gas pipeline through the Baltic Sea. This crucial project for Russia is meeting increasing opposition among Baltic Sea states, and currently public opinion also in Sweden is turning against letting the pipeline run through its territorial waters. Would Sweden and other Baltic states turn down the project, with a Centrist government ruling Estonia, one scenario is that Russia might turn its frustration towards Tallinn, possibly giving massive support to Savisaar in order to gain a permanent influence over EU-member Estonia. This would create a very difficult terrain for the EU and Estonia's neighbours to manouevre, not to speak of what challenges it would pose to president Ilves and the Estonian political system.

Finally, is there any solution in sight for the issue of the Bronze Soldier monument? As for its removal, Estonia probably lost its chance back in 1991. However, doing so spurred an idea of expanding the monument to hold also statues of Estonian, German, as well as allied soldiers of WW II, along with various paraphernalia. This idea was never realised, paradoxically due to lack of metal for the statues. In the early 1990s, Estonia was a major exporter of metal, despite its evident lack of this type of natural resources. Mainly Russian business interests made fortunes by exporting whatever metal scrap they could lay their hands on, thus forming the mighty Russian economic interests that now dominate the transit trade. So, what then made Russian fortunes - the metal that might have expanded the Bronze Soldier monument into a unifying symbol for Russians and Estonians alike - now comes back to haunt the transit profiteers by a constant threat of sanctions to their trade. Had there been metal then, this explosive matter might have been defused at an early stage. Then, of course, Estonians and Russians would probably have found some other symbol to quarrel over.

Comment: On Baltic economy, especially Latvia, cf. "A Bursting Baltic Bubble." For an overview of Russian-Estonian relations see also "Estonia: Stalemate in Russian Relations."

Russia: Foreign Wines Dry Up

After July 1, the imposition of a new law on liquor combined with usual bureaucratic tardiness threaten to dry up the Russian wine market by making imports of foreign wine virtually impossible for several months.

The new law aims at blocking the wide spread of counterfeit liquor by requiring mandatory excise labels on all wine and liquor bottles sold in the country. Despite the fact that the law has been long expected, Russian authorities have been slow in taking practical measures for it to work. Earlier this year, Russian liquor consumers were hit by a similar bureaucratic foulup, when there was a sudden lack of equivalent labels. Someone had simply forgot to order the labels in time for producers to put them on their bottles, which created a short but shaking "vodka crisis" for Russian society. Whether the issue was solved by postponing implementation of the law until now or if it is a case of separate laws with similar content is unknown. Nevertheless, the result is once again more or less the same.

This year, Russian liquor vendors have been especially hard hit by misdirected or poorly implemented government measures. In April Russia imposed an embargo on imports of the vastely popular Georgian and Moldovan wines, tendering a more traditional and low-price market. This might have been an eye-opener for consumers, but after some confusion Georgian wines were substituted with wines from other countries. This option now seems to peter out.

Indeed, representatives of liquor retailers do not expect that the market on imported alcohol will work properly again until November. Retailers expect a loss of some 900 million USD in revenues and that up to a third of Russian liquor stores might close indefinitely. Why the government has so blatantly bungled the issue remains unclear. Favouring a next to inexistant domestic wine production can hardly serve as an explanation, if the foulup is not directed at supporting Russia's vodka producers. The latter would, however, make no sense while such a move would but incur higher state costs for the consequences of alcholism. So, in lieu of any better explanation, one may only assume that this is yet another blunder of the infamous Russian bureaucracy.

Whatever happened with the vodka crisis?

A few weeks back, headlines of western newspapers warned for a coming "vodka crisis" in Russia. The country was to turn dry due to a clerical error. Reminiscences of Gorbachev's anti-alcohol campaign in the late 1980's, made us recall images of people drinking whatever liquor they could get hold of. Then, nothing more was heard of this potentially dangerous crisis. Why so?

The reason is simple. Consumer is king - in Russia as elsewhere. As long as there is money to be made, any problems may be solved. And, lo and behold, how much money wouldn't be lost if Russia dried up? This was simply unthinkable, and the problem - if one may speak of a real problem - was quickly solved.

Then, what was the problem? Apparently, a special print-shop making tax-labels for vodka bottles was late with a delivery to vodka factories. Thus, vodka factories would not be able to put out their products on the market. Strangely enough, it never appeared to western media that there might be other print-shops to do the job, or that this particular print-shop might catch up on production. No, the story was simply too good to be passed, regardless of the unfeasability that Russia would run out of vodka.

Today, many liquor stores are very service-minded. In major cities, it might even happen that a store that doesn't have a special brand, might get hold of a bottle for you within a few hours and then deliver it to your home - sometimes at any hour of the day. So, regrettably, the "vodka crisis" once more turned western media to focus on an obvious haux, which was well in line with western prejudice towards Russia as a wholly backward country. It stands out as a true paradox, that the alleged vodka crisis almost got as much attention in western media as the recent NGO-bill. The list of Russia's problems is long - democracy, civil liberties, media, human rights, corruption etc - but lack of vodka is not one of them.

Russian-Ukrainian Gas Crisis: Profits vs Politics

The recent gas crisis between Russia and Ukraine has raised fears - not least in the EU - that Moscow is increasingly using energy as a political weapon. Such fears may be correct from a general perspective, when reviewing the political will of the Kremlin. An opposite case must, however, also be made for economics - that the crisis was more a case of profit than of politics.

An overarching question of the Russian élite since the late 1980's has been how to maximise ones own profits. The driving-force has been the individual desire for wealth. During Yeltsin's privatisation, such desires resulted in unharnessed "bandit-capitalism." Enormous fortunes were made by more or less doubtful means. Although president Putin seems to be trying to redistribute some of this wealth to his own political and private benefit, most oligarchs have been left alone as long as they don't meddle into politics. From the perspective of the mega-rich and major enterprise, trying to leave politics aside of making money has become a goal in itself, regardless of whether you are within or outside the walls of the Kremlin. To make profit in real money and to avoid being forced into economically worthless political deals should appear the obvious choice in rational terms for enterprise. Private interest comes before state interest. This, initially, may have been the motive of Gazprom - the Russian gas monopoly - in connection to the Russian-Ukrainian gas crisis. Still, many Western analysts claim that the crisis was politically motivated. Such analysis, however, leaves out the first logical step of analysis, namely that of making real money.

As the crisis arose in late December, Russian gas monopoly Gazprom demanded that Ukraine paid a price roughly equivalent to that, which Western European customers pay (some 230$ per cubic metre compared to the Ukrainian price of 50$). Raising revenues from exports to Ukraine almost fivefold, was - needless to say - tempting to Gazprom in order to boost the company's stock price. In June 2005, the Russian government became majority shareholder in Gazprom, which opened up possibilities to lift the state-imposed 20% limit of foreign investment in the company by year's end. This would also be in line with the liberalisation schemes of Gazprom and its aim to expand in the oil-market, creating - all in all - the basis for a shooting stock price and compensation for the failed merger with oil-producer Rosneft. This would indicate that the main reason for Gazprom's action against Ukraine was to attain higher profits.

In contrast to this, one may instead argue that the political side of Gazprom's action was too obvious to be ignored. Accordingly, Russia would - by means of Gazprom - want to put further pressure on Ukraine - possibly to destabilise or topple its pro-Western government - before the country's parliamentary elections in March. Furthermore, the mere fact that Gazprom's chairman, Dmitry Medvedev, is also Russia's vice Premier, would make for a strong case that Gazprom's action was politically motivated. This may well be the case, but judging from Medvedev's surprised reaction when confronted with the stern reaction of the EU, as Gazprom turned off gas supplies to Ukraine, he obviously was ignorant of the full consequences of Gazprom's action. Is it really possible that the Kremlin was ignorant of the possibility that cutting Ukraine's gas supply might also mean cutting down gas supplies to the West? Didn't Medvedev or someone in the Kremlin think of the fact that gas to Europe first goes through Ukrainian pipelines, thus making it easy for Ukraine to compensate a cut in their supplies with those that would have gone to Europe. This, evidently, was how Ukraine acted with the consequence that gas supplies to Germany, Hungary, Slovakia and other EU countries were heavily reduced, creating a crisis as much with the EU as with Ukraine. Russia was portrayed as an unreliable business-partner by international media, and European politicians called for reviewing and diversifying energy supplies. Even worse, Russia again became a source of threat to Europe. Gazprom's action thus heavily damaged confidence in Russia in political as much as economic terms. Trust between Russia and Europe was dealt a heavy blow.

So, the question arises: Are the masters of the Kremlin really so crude in their political thinking as not to foresee the consequences of their actions? Did they really not consider that the issue could develop into something more than a bilateral crisis between Russia and Ukraine. I, for one, would like to think that this is not the case if regarding Gazprom's action as a political issue. It is true that the Kremlin has made a series of serious political misjudgements and mistakes in recent years, but despite all blunders, I do hope that Putin and his entourage are not so much of political novices as to be outright stupid. Therefore, to the extent that the Kremlin was involved in Gazprom's action against Ukraine, some other factor than politics would appear to have blurred their judgement. This factor might be that profits preceded politics. The prospects of increased profit by raising the price of gas to Ukraine might explain why the Kremlin oversaw the possibility of negative side-effects for Russian credibility in relation to the EU. Thus, the economic analysis might have crowded out thinking in political terms.

The alternative - that Russian action was deliberate and informed - would truly be tantalising. This would mean that Russia has reached such a level of confidence and self-sufficiency in foreign policy terms, as to be willing to risk relations with Europe and to signal that the country has the power to put a threat to the EU by cutting energy supplies. It is true, that energy is increasingly seen as an intrument of Russian security policy, but it is as much true that this instrument so far has been used with some caution and only in relation to former soviet republics. Would it, however, be true that the Kremlin - having gained control of Gazprom - rationally foresaw the political consequences of the company's action, European calls to review Russia as energy-supplier should be taken very seriously. As long as this has not been proved, however, it might be more plausible to assume that Russian judgement was blurred for financial reasons. Thus, it appears that profit preceded politics and private interest came before state interest. Another unintended consequence is, of course, that keeping politics and economics aside failed, and that Gazprom - in contrast to its aim to liberalise - is now looking at much greater political involvement in and direction from the Kremlin. To conclude, how likely is it - all things considered - that the Russian-Ukrainian gas crisis was the effect of a Russian rational political decision?