An irate Russia is up for a fight

Events in Slovakia rarely shake Europe or portend a crisis of the future. Yet the country's declaration of a "state of emergency" last week, after the sudden loss of 70 per cent of its gas supplies in mid-winter, is another sign of the shadow cast by Russia's new assertiveness.

Slovakia has found itself the principal victim of the bitter dispute between Russia and Ukraine over gas payments. About 80 per cent of all Europe's gas supplies from Russia depend on pipelines running across Ukraine. The disruption caused by the stand-off between the two neighbours is now imposing shortages on a string of countries, ranging from Bulgaria and Macedonia to Croatia and Poland.

The background to the dispute is simple: Russia's state energy giant, Gazprom, accuses its Ukrainian counterpart, Naftogaz, of failing to pay for last year's gas imports, "stealing" supplies intended for other European countries and refusing to agree a reasonable price for exports in 2009. In all, Russia says that Ukraine owes more than $400 million and blames its neighbour for the wholesale theft of gas.

At a stroke, the volume of gas entering Ukraine's pipeline network was reduced by about two thirds, leaving a string of countries shivering along the supply chain. On the face of it, this incident looks like a vivid demonstration of Russia's power to hold Europe to ransom by wielding its control of energy supplies.

If Ukraine is today's victim - and a collection of innocent countries are suffering the knock-on effects - who might be next? The sense of alarm is genuine, but Russia's position is not as strong as it might appear and nor is this dispute as simple as it seems.

Instead, the lesson of the crisis may be that Moscow faces financial problems of its own, caused by the slump in oil prices, and the real energy relationship between Europe and Russia is one of mutual dependence.

One of the advantages of being the world's biggest country is that Russia also has more natural resources than anywhere else.

When it comes to gas, Prime Minister Vladimir Putin's domain boasts almost 1.7 trillion cubic feet of the stuff, more than twice as much as the next country in the league, which happens to be Iran.

In all, about 25 per cent of the European Union's gas imports come from Russia, but this broad figure disguises huge variations in the dependence of individual countries, ranging from 100 per cent for Finland and Slovakia to more than 80 per cent for Bulgaria and less than 3 per cent for Britain.

The Kremlin's own reliance on gas revenues, however, is unmistakable. Last year, Gazprom provided no less than 20 per cent of Russia's entire central budget - about $90 billion.

Just as Europe needs Russia to supply its gas, so the Kremlin relies on us to buy it. Put bluntly, we need each other and the balance of advantage may not be entirely with Russia. If the Kremlin ever decided to sever gas supplies to Europe, national bankruptcy would surely follow.

Drastic steps

The Kremlin clearly believes that drastic steps are necessary to avoid being on the losing side of this stand-off. The bitterness and urgency stem more from the knock-on effects of the collapse in oil prices than any new Russian belligerence.

There is, of course, more to this than a simple commercial wrangle. Money matters a great deal to Gazprom, yet political imperatives lie behind many of its decisions. Its chief executives generally go on to powerful positions in the Kremlin - one of them, Dmitry Medvedev, is now president of Russia, although his old boss, Putin, appears to be firmly in charge of handling the current crisis.

Russia does not disguise its strategic ambition to stop Ukraine from joining Nato or the European Union. The divisions within Ukraine's government and the tensions created by the presence of a large Russian minority create obvious openings for the Kremlin.

Yet there is another, unspoken theme to the pressure exerted on this former Soviet Republic. Russia views its old vassal states, which it terms the "Near Abroad", in a fundamentally different way from the rest of Europe. Behind this episode - and the many similar spats that preceded it - lies the Kremlin's desire to continue to exert a measure of direct control over its neighbour.

For the rest of us, that is a worrying sign of Russia's lingering post-imperial angst, but it also means that we may be wrong to draw wider lessons from Ukraine's travails. This "gap in understanding" provides an additional note of discord to the present stand-off. But the Russian bear is neither as strong nor as belligerent as it may appear.