Comment du Jour

Ukraine's Prime Minister Arseniy Yatsenyuk

Ukraine’s Dangerous Dependency on Russian Energy…and goodwill

UNITED NATIONS—A dangerous and deteriorating diplomatic showdown continues over Ukraine as the United States and European Union rhetorically push back  against Vladimir Putin’s power grab in the Crimea.  In an emergency Security Council meeting, Ukraine’s embattled Prime Minister Arseniy Yatsenyuk made an impassioned plea for his country’s sovereign right “to remain independent and free.”   

Ukraine’s fledgling government nonetheless, realizes both its vulnerability to neighboring Russia’s  political policies  as well as its energy supplies. 

Ukraine and Europe in general face a dangerous dependency on Russian energy; especially the free and unhindered flow of natural gas to heat its homes and power its factories.  Ukraine has already seen the chilling results of Moscow turning off the gas tap on two occasions in 2006 and 2009.  There’s nothing like a big freeze to concentrate thoughts.

Back in 1981 America’s new President Ronald Reagan, warned West Germany and the Europeans in general of the geopolitical dangers resulting from a trans-Siberian pipeline then being built to swish cheap Russian energy to Europe.  I recall being in Germany and hearing the pious rationalizations by both big business and politicians how the “Americans are overreacting” and how Soviet energy exports were “all business.” 

A generation later, and after the fall of the Soviet Union,  the political palaver in both Washington and the European Union about Putin’s resurgent Russia, seems to overlook the  glaring reality that Eastern and some West European states, are overly dependent not only on the Russian natural gas supply, but let’s add, the Kremlin’s callous use of energy as a political tool to effect change.

In 2006, the Bush Administration sharply criticized Russia for using energy supplies as a weapon to politically influence countries and urged the Europeans to diversify  energy supply sources.

Without question Ukraine, as an integral part of the former Soviet system and despite its sovereignty since 1991, is grafted into the Russian energy grid. While not surprising, this is a cause for concern given the current crisis. We may also add that the three Baltic states, Latvia, Estonia and Lithuania,  though now independent from Moscow and thankfully members of NATO and the European Union are 100 percent dependent on Russian energy.  Add Finland an Sweden  too, in the 100 percent club.

The Central European countries such as the Czech Republic, Hungary, Slovakia, and Poland while  free of Moscow’s formal embrace, and also NATO and EU members, are  highly dependent,  may we add with a wry smile, on Russian largesse?

                                                           

Now to Europe’s core countries.  Germany, without question Europe’s economic powerhouse, depends on Russia for one third of its oil and gas needs. This dependence has widened given Germany’s ongoing phase-out of nuclear power.

Importantly neither the United Kingdom nor the Netherlands have any significant Russian dependence given alternative sources from North Sea and Norway.

Much of the current latter day wisdom coming out of Washington points to growing natural gas production in the USA which can be sold and shipped to Europe. This is a prudent medium term plan which sounds reassuring on paper until you realize that building natural gas terminals to ship the energy are mostly on the drawing boards.  

Then there’s all the talk about new pipelines.

According to a Congressional Research Service  report, “Europe’s Energy Security,”

“As Europe’s natural gas production has declined in recent years, its dependence on imported natural gas has increased. This has left it more dependent as a whole on its primary supplier, Russia, which has shown some inclination to use its resources for political ends.”

The respected CRS adds, “All Russian natural gas exports are controlled by Gazprom. As a state-controlled firm, Gazprom has the closest possible links with top Russian leaders (Prime Minister Dimitri Mevedev served as president of Gazprom). The personal and political fortunes of Russia’s leaders are closely tied to Gazprom.”

 Approximately half of all  Russian government revenue comes from oil and gas.

The Kremlin is not going to shut off the lucrative tap to Western Europe. Yet, as we have already witnessed, any interruptions to Ukraine would cause supply problems downstream.  Remember many of the pipelines to Europe transit Ukraine.  

Germany and Poland have been particularly scornful of Moscow’s intimidation of Ukraine.  Yet as Poland’s Prime Minister Donald Tusk candidly told Reuters, “Germany’s reliance on Russian gas can effectively limit European sovereignty. “

Despite Europe’s distaste and unease with Moscow’s moves in Crimea, and possibly beyond, sadly Europe’s diplomatic freedom of action is compromised by its strong energy dependence on Russia.  This is hardly coincidental.