On New Year's Day, as Russian President Vladimir Putin was assuming the chairmanship of the Group of Eight industrialized nations, he mocked the free-market creed of that exclusive club by cutting off the flow of Russian natural gas to Ukraine. That transparent attempt to influence Ukrainian politics reflected the Kremlin's statist control of Russia's lucrative energy sector, the Boston Globe reports.

Putin's Ukrainian ploy backfired almost immediately. European consumers of Russian natural gas found that their deliveries, which arrive by a pipeline traversing Ukraine, decreased by an amount comparable to Ukraine's annulled allotment. The foreseeable result was public grumbling in Europe about Russia's unreliability as a primary provider of natural gas. Putin was obliged to back down and strike a five-year deal with Ukraine, raising natural gas prices gradually.

It would be nice to think that Putin learned his lesson, but there is no reason to believe he is contemplating changes either to the Kremlin's domination of Russia's energy assets or to the practice of using those assets to impose the Kremlin's will on other countries.

If there was any lingering doubt about Putin's command of Russia's state-controlled energy conglomerates, it was erased by the ostentatious role he played during the showdown with Ukraine. Officials of the energy giant Gazprom were seen live on state-run TV making reports directly to Putin. It was he who gave them their marching orders for negotiations with Ukraine over the price and the transit fees for Gazprom's natural gas.

Even after European leaders had voiced their anxieties about the Kremlin's political manipulation of energy policies, Putin was proud of his role as the true CEO of Gazprom. He plainly sought to impress on the Russian public that he was dictating Gazprom's energy and pipeline decisions not in accordance with free-market principles but for the political purpose of punishing Ukrainian politicians who want to take their country out of the Russian orbit and into Europe's.

A particularly nasty sidelight to Putin's manipulation of energy assets for the purpose of enhancing the Kremlin's influence abroad concerns Germany's recently replaced chancellor Gerhard Schroeder. Schroeder was instrumental in negotiating a deal with Putin for a natural gas pipeline that will bypass Ukraine and Poland, running below the Baltic Sea and terminating in Germany. As an apparent reward from Putin, Schroeder has been made chairman of the consortium building the $4.8 billion pipeline.

Far from conforming to the G-8 ideal of separating geopolitics from commerce, Putin may be infecting other members of that capitalist club with the corrupt, unchanging practices of the Kremlin



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