GIVING IN….

At a meeting with President Putin in Sochi on the Black Sea, President Leonid Kuchma agreed in principle to use equity in Ukraine’s gas-pipeline system to pay Russia for gas delivered to Ukraine. Ukraine’s gas debt to Russia amounts to nearly $2 billion.

There are dozens of details to be worked out–the price of the gas and the shares among them–but in this case the devil is in the big picture. Gaining control of the Soviet-built pipeline has been a goal of Russian diplomacy for years.

Ukraine has declining leverage against the Russians in these negotiations. Last week Russia’s gas company Gazprom announced formation of a consortium with German, French, and Italian gas companies to build a $2 billion pipeline that would run to western Europe through Belarus, Slovakia and Poland, bypassing Ukraine entirely. Next week President Putin goes to Paris to sign agreements in principle on supplying Russian gas to European Union customers in Western and Central Europe for the next twenty years. If Russia can reach these markets without transiting Ukraine, the existing pipelines will be highways to nowhere.