The Bullying Effect

Russians are known for being tough negotiators, but their decision last week to cut off Ukraine's supplies of natural gas in order to secure agreement for a big gas-price hike may have been a little too tough. The dispute was rapidly resolved. But the shocked reaction in Europe and the U.S. casts a cloud over Russian President Vladimir Putin just as he takes over chairmanship of the G-8 association of industrialized nations, and it will probably accelerate Western efforts to reduce dependence on Russian gas and oil. U.S. Secretary of State Condoleezza Rice publicly accused Russia of behaving irresponsibly. And in the European Union, the biggest export market for Russian gas, officials said that reducing dependence on Russia and ensuring security of energy supplies are now top priorities. Measures under consideration include plans to diversify gas supplies, stock up on liquefied natural gas from Egypt, Nigeria and elsewhere, and develop alternative energy. "Europe needs a clear and more collective and cohesive policy on security of energy supply," said Andris Piebalgs, the E.U.'s Energy Commissioner.

An unexpected winner after the Ukrainian fracas might be the nuclear-power industry. Some Germans are questioning plans in their country to pull the plug on nuclear power. "We now see with the gas dispute between Russia and Ukraine how quickly we can become vulnerable," said Edmund Stoiber, the Governor of Bavaria. In France, which already relies on nuclear energy for more than 75% of its electricity, President Jacques Chirac announced plans to develop a new generation of reactors.

In Ukraine itself, critics worried about the likelihood of big price rises in the future. And the pivotal role in the deal given to a Swiss-based intermediary company partly owned by unnamed Ukrainian investors increased concerns for some. "What has happened is a major scam," Yuliya Tymoshenko, the former Ukraine Premier who is expected to do well in parliamentary elections in March, told Time. The Russian bullying tactic may have lasted only a few days, but its effects are still coming down the pipeline.