Europeans have entered the New Year suddenly more aware of the extent to which they rely on Russian gas imports for domestic and industrial energy. The dependence has grown over recent years, but without sufficient realisation of the potential economic and political vulnerability involved. Following Russia's decision to cut off Ukraine's gas supplies on Sunday there was a major knock-on effect elsewhere on the Continent yesterday, which is bound to be reflected in market prices. It is imperative that the dispute be settled rapidly and its lessons learned.
Ostensibly, this is a commercial dispute about pricing policy, but behind it there are clear geopolitical implications concerning Russia's relations with Ukraine and states which were formerly were part of the USSR. Russia's leadership resents Ukraine's growing reorientation towards western Europe since the Orange Revolution last year. The timing of this row plays into Ukraine's elections in three month's time. Current polls show the more pro-Russian candidate ahead of the outgoing president Viktor Yushchenko, whose movement is divided. So there are motives on both sides to play it politically and they have done so in the past few days.
This brinkmanship is likely to backfire because of the immediate impact on the rest of Europe. Russia's Gazprom company says it will immediately restore supplies to countries such as Hungary, Romania, Austria, Italy, Poland, Slovakia and Croatia which were down yesterday. Ukraine denies syphoning off supplies, although it has the capacity and motive to do so in order to create sympathy for its position. The rights and wrongs of the pricing dispute are complex. Gazprom has just been restructured to become a more commercial entity and it may not suit that profile to continue a substantial gas price subsidy to Belarus, Georgia and Armenia, compared to the much more expensive European price. There should be room for compromise on these issues by phasing in price increases over a longer transition period.
But cutting off supplies is a nuclear option at the best of times, even if Ukraine has refused to pay a fourfold increase. This decision will damage Russia's reputation as a reliable supplier and its long-term position as Europe's main source of gas energy. It will - and should - stimulate a search for alternative supplies, pipelines and sources of energy and co-ordination of energy policy throughout the EU. Above all, it should alert Europe to the dangers of taking Russia for granted.
Energy supplies are President Putin's major source of power, influence and income. If these resources are to be used as wilfully as they have been on this occasion, it will be necessary to confront Mr Putin with the political consequences of such irresponsibility. It is in everyone's interest to create a long-term framework of co-operation in Europe which can contain such disputes. But that will take a lot more effort than has yet been shown collectively by European leaders.