Kremlin uses gas as a weapon

On the surface, the battle between Russia and Ukraine that has choked off natural-gas supplies to much of Europe in the dead of a cold winter is a purely commercial dispute. Deeper down, it's something more menacing -- part of what looks like a calculated strategy by Russia to regain influence over countries that were once part of the Soviet empire and to neutralize European opposition.

Gazprom, Russia's state gas monopoly, is as much a policy arm of the Kremlin as it is a company. Russian President Dmitry Medvedev is its former chairman. It owns a big Russian media company and operates it as a government propaganda arm. It is the largest extractor of natural gas in the world and accounts for a quarter of Russia's budget. The government controls a majority of its board, and though Gazprom's management decision-making structure is murky, most analysts believe the man who really calls the shots is Russian Prime Minister Vladimir V. Putin, who once argued in a scholarly paper that Russia's energy resources were the key to promoting its national interests.

Indeed, it doesn't take a conspiracy theorist to find connections between Gazprom and many of the Kremlin's most aggressive foreign policy moves, including the summer invasion of Georgia by Russian troops. Gazprom supplies a quarter of Europe's gas -- a key fuel for home heating and electricity generation -- but its dominance could be threatened by a proposed pipeline that would transport gas from Central Asian countries such as Turkmenistan through Georgia to Turkey and southern Europe. The invasion rattled investors' nerves and demonstrated that Russia is capable of toppling Georgia's Western-leaning government any time it chooses, putting the project in jeopardy.

In the aftermath, the Bush administration sought to begin the process for Ukraine and Georgia to become members of NATO, a proposal that was swiftly quashed by European leaders, headed by German Chancellor Angela Merkel. Perhaps it's coincidental that Germany is Gazprom's biggest customer, but probably not.

All this serves as a backdrop to the current dispute, which started Jan. 1 when Gazprom and the Ukrainian government failed to agree on the terms of a 2009 contract. Though most of Europe pays the market price for gas, Ukraine negotiates annual contracts at a deep discount; Gazprom also pays a transit fee for the gas it ships to Europe through Ukrainian pipelines. After Russia shut off the gas it sends to Ukraine for domestic use, it accused Kiev of stealing gas intended for Europe, so it shut off that flow too.