Regardless of what happens in the Russian-Ukrainien gas dispute, the Kremlin's global foreign policy strategy has already been badly damaged.
The Kremlin is undermining its political influence in the Ukraine dispute
There's no question that Gazprom, Russia's state-owned energy company, has the right to demand Ukraine pay a higher market price for natural gas more in keeping with international rates. But the same goes for Ukraine. It wants to be paid better for the Russian gas pipeline to Europe that's so important to Gazprom. At heart, both sides are closely dependent on each other, which should actually facilitate agreement.
In addition, Gazprom has itself recently demonstrated in its dealings with other former Soviet republics that there's a great margin for the price of gas. With Georgia, Armenia and Lithuania -- not to mention the special case of Belarus -- it agreed on far lower gas prices than the $220-$230 (186-194 euros) per cubic meter that it's demanding from Ukraine. If purely commercial interests played a role in setting the price, a result acceptable for both sides would surely have been reached already.
Apparently another factor is at issue in the dispute with Ukraine: Russia is using its energy supplies to politically influence its neighbor. It's difficult to avoid the impression that the Russians' obstinate behavior in negotiations is meant to punish Ukraine, which fell out of favor with the Kremlin due to the pro-Western Orange Revolution late last year.
The Russian threats and ultimatums are all the more cutting as Ukrainian parliamentary elections are only three months away. The "orange" camp, centered on the one time figureheads Viktor Yushchenko and Yulia Tymoshenko, is already deeply split. Numerous polls say pro-Russian candidate Viktor Yanukovich's party has the best chances. Freezing, or at least disillusioned, Ukrainians could relegate the Orange Revolution to a short episode in their history.
Bad damage to Russia foreign policy
The blatant use of Russian energy supplies for foreign policy aims, however, cancels out Putin's strategy to employ the energy supplies to increase Russia's international influence. For, in the gas dispute, Russia doesn't come across as a responsible energy supplier and a reliable partner, but as an unpredictable actor who can't be counted on.
Europe will start looking elsewhere to cover its natural gas needs
Even if European consumers are spared shortfalls, one thing is clear: Dependency on Russian energy supplies means direct political dependency on the Kremlin. Those who issued warnings about Russia's imperial reflexes now see themselves proven right. Europe's governments and energy firms will start searching more intensively for alternative suppliers and supply routes as well as ways to save energy and promote alternative energy sources. And they are right to do so, since relying solely on Russian gas and fair business conduct appears too risky. But energy isn't a suitable political weapon -- something the Arab states have also discovered.
It's particularly ironic that Russia assumed the presidency of the Group of Eight on January 1. Moscow had previously declared that global energy supplies and Russia's role concerning them were among the most important issues for its G8 presidency. However, the Kremlin's strategy to use its energy supplies to become integrated into the world community as a reliable partner has been badly damaged due to the escalation of the Russian-Ukrainian gas dispute.