Europe has been in the grip of a new cold war. This struggle has not been fought with militaries, but rather with energy exports. Yes, Russia and Ukraine are having their annual tussle over natural gas exports, and Europe has felt the effects. It is tempting to see the fight as a geopolitical faceoff — yet another attempt by Moscow to flex its muscles and restore its dominion over the "near abroad."
The real issues, though, are considerably more mundane. Russia wants fair value for its energy exports and is prepared to play hardball to get it.
Two years ago, in January 2006, Russia cut off gas supplies to Ukraine. The dispute had been building for months as Gazprom, the Russian national gas supplier, wanted to end the subsidy it had provided for Ukraine and sell natural gas at market prices. That subsidy had been in place for decades and Russia was no longer prepared to give Ukraine special treatment. The subsidy had reduced the price to less than half of that paid by other customers. Unable to reach agreement on a new price, and alleging that Ukraine had siphoned gas from the pipelines as well as stolen gas stored in Ukraine — both charges denied by Ukraine — Gazprom closed the spigot.