The Ukraine government is a teenage boy, and a rather ungrateful teenage boy, at that. The former Soviet Bloc country wants to be independent and chose its own friends. But at the same time, it still wants an allowance from good old Dad.

And in this case, Dad is Russian natural gas giant Gazprom, which threatened yet again this week to cut off not only the Ukraine’s allowance, but its electricity, too. And those threats aren’t going to end anytime soon.

In the good old days, the USSR subsidized energy to Soviet states. And even after capitalism and Gazprom emerged from the ashes of the Union of Soviet Socialist Republics, former bloc countries received natural gas from Russia for much cheaper than the rates charged to Western Europe and the rest of the world.

Naturally, that’s how the Ukraine would like to keep things, and thank you for asking. But the country isn’t even paying the cheaper prices, which are nearly half the going rate for Gazprom’s other clients. Instead, the Ukraine would like to continue writing IOUs to Russia for the electricity that allows it to fill out all of those NATO forms and provides the energy to arrange missiles along its eastern border (yes, that’s the one that faces Russia).

You can’t blame Gazprom for being a little annoyed about the situation, like any father dealing with an unruly child. Independence has to be earned, afterall.

“And if we can’t trust you to make the right decision, then we’ll have to make the decisions for you,” at which point Vlad the President informs his Ukrainian counterpart that his countrymen won’t be going anywhere (at least not anywhere with indoor heating or electricity) until they pay off some of their debt.

The Ukraine claims it’s too broke to pay up, and Gazprom replies that that’s just fine and dandy, as long as the country doesn’t mind returning to the 19th century this winter. If it wants to continue living in the light, then someone needs to shuffle around a few priorities in the budget and pay up, which, Russia told them, was the original plan after last year’s stalemate.

So who’s the bad guy? Well, both of the players are throwing egotistical tantrums, and this isn’t the end of the battle between Russia and the Ukraine. But Gazprom is always going to win the fight.

The Ukraine is desperate for the revenue from Gazprom’s pipeline, which pumps about 80% of the company’s European sales through its underground vaults on any given day. And Russia only has to mention a complete shutdown of its Ukrainian pipeline to bring the political force of all of Western Europe (which gets about a fifth of its gas from Gazprom) down on the country.

And the Ukraine’s threat to join NATO and train U.S. missiles on Russian borders is an empty one that will only end up shooting the Ukrainians in the foot (or maybe the head, depending on how high those missiles are pointing). Gazprom has all the power in the situation, and the government-owned corporation knows it.

When you start reaching for Cold War-era threats to keep from paying your bills, you know you’ve already lost. The Ukraine is playing an empty threat from the U.S., which isn’t about to step in on the side of a cranky child if it means risking the annoyance of the world’s fastest-growing leviathan of energy supply. Remember, we like Russia, now… and if we’re smart, then we’re scared silly of Vlad and the Gazprom goons that come in behind him.

Now if only the U.S. stock markets would accept what the rest of the world has already discovered: You never bet against Gazprom in the new Russian republic.

Gazprom (OGZPY: Pink Sheets) price has picked up nicely from its $35 low during last year’s Russian summer, but it still isn’t trading for nearly what the company should be in today’s energy market. Gazprom’s current trading price of $49 is a nice gain on your investment if you got in last year, but I’m not happy with that.

Perhaps the stock is still too exotic for those who don’t normally trade energy shares or foreign shares. It’s still only listed on the pink sheets here in the States. And that may stall out anyone from the ExxonMobile crowd.

But in the long-term, I still believe in Gazprom. With the world’s largest natural gas field and its fingers in so many Asian and European pies that it’s hard to keep track, Gazprom is going to be the key player in the future of energy markets. And you can say you got in when it was just a $40 stock way back when.

Gazprom has decades of growth in front of it and a wealth-minded Russian government behind it.

Stephanie Grimmett
(TFN)