I would like to thank Marita for allowing me to publish her work. This has appeared at
Like many conflicts before it, the current battle brewing
between Russia and Ukraine has a strong energy component.
Russia has a history of using its energy supplies as a
control mechanism—such as the 2006 and 2009 gas wars when it cut natural gas
supplies in the midst of winter and left many European nations, which rely on
Russian natural gas that is shipped through Ukraine, without energy. The supply
disruptions were due to “disputes over politics, price, and late payments,” says the Washington Post. Back in November,
before the current conflict erupted, Reuters reported: “Ukraine has for years been a
politically troubled buffer state between Russia and the European Union, and
has used its status as a gas transit corridor to play Moscow off against
Brussels.”
Russia supplies virtually all of Ukraine’s natural gas
and Ukraine serves as a critical transit route for sending Russian natural gas
via pipeline into Europe.
Aware of its reliance on Russia, and seeking energy
independence, Ukraine has taken several steps to move away from the grip Moscow
holds over its energy supplies—a move that has not gone unnoticed by Russia. In
addition to reducing its use, Ukraine is seeking supplies from other sources
and has signed deals to develop its own resources that are thought to be
“significant” and “similar to those that unlocked a boom in U.S. energy
production,” reports the Christian Science Monitor (CSM).
A 2011 announcement in LNGIndustry.comstates: “Ukraine is going to officially put
out a tender for a company to perform a feasibility study for an LNG
importation terminal on its Black Sea coastline.” It cites Vladyslav Kaskiv,
the head of the state agency for national projects management (Ukrnatsproekt),
who said: “construction on the terminal and regasification of liquefied gas
will help diversify sources of energy carriers and strengthen the country’s
energy security while improving the investment climate in Ukraine.”
In January 2013, Ukraine signed a $10 billion shale gas project with
Royal Dutch Shell. In November, Chevron signed a similar deal. Regarding the
deals, according to the Financial Times (FT), Ukraine’s president Viktor
Yanukovich said: the agreements “will allow us by 2020 to
become self-sufficient in gas, and, under an optimistic scenario, to become an
exporter.” Before being ousted, the Yanukovich government was in negotiations
with a group led by ExxonMobil, which wants to explore for oil and gas in a
deep-water block in the Black Sea.
The November 2013 FT report suggested that the Shell and
Chevron deals “could increase tensions with Russia.”
Ukraine—which pays some of the highest natural gas prices
in Europe—asked Moscow, according to Reuters, to “ease terms it considers
excessive and unaffordable.”
In November, weeks before Kiev was due to sign a
free-trade agreement with the European Union (EU), Ukraine’s state energy
company, Naftogaz, halted natural gas imports from Russia in a dispute over
pricing. President Yanukovich then did an “about face” and backed away from the
European integration deal in favor of repairing economic ties with Russia.
Russian President Putin had been pressuring Yanukovich to, instead, join a
Moscow-led economic bloc—The Eurasian Customs Union. Putin threatened trade
measures against Ukraine if it signed the EU deal as planned on November 28-29
in Lithuania.
Exercising a form of energy blackmail, Russia offered
cheaper gas if Ukraine would join the Eurasian Customs Union. Russian First
Deputy Prime Minister Igor Shuvalov told Bloomberg: “No one other than Russia
can provide Ukraine with the necessary funds so quickly and in such a quantity.
A gas agreement could help relieve Ukraine of a huge problem. We can also give
them a loan, but we will not help them without commitments on their part.” The
Bloomberg report continues, “Joining Russia’s customs union would shrink its
current account gap by cutting energy costs.” Armenia joined the Eurasian
Customs Union in September and, according to Shuvalov, is now getting “a
specific price for gas because they’re signing the whole package of agreements
on the customs union.”
According to Forbes' Kenneth Rapoza: “Naftogaz was
originally paying over $400 per thousand cubic meters for Russian gas, but once
Yanukovych leaned towards Moscow instead of Brussels, the price was reduced to
$268.50 and came with a $15 billion aid package as a Christmas present for the
pro-Russian Ukrainian.”
Naftogaz owes Russia’s state-owned gas company, Gazprom,
$2.7 billion in unpaid bills from last year. The CSM report states: “That debt
plays a major role in the economic woes driving the unrest in the streets of
Kiev.”
Ukraine’s new interim government is led by “Washington
favorite” Arseniy Yatsenyuk. Russian Prime Minister Dmitry Medvedev, Rapoza
reports, has warned: “The current political crisis in Ukraine” could mean that
the nearly 45% cut on natural gas from Russia would be “reconsidered.”
Moscow sees that its natural gas supplies are a weapon it
can, once again, wield against Ukraine. The CSM states: “By cutting a deal for
discount gas with Russian President Vladimir Putin last November, Ukraine
infuriated its pro-Europe contingent and entrusted its energy security to a
fickle ally.” Former U.S. Ambassador to Poland Lee Feinstein adds: “It was at
its most a short-term benefit, but in the long run served only to deepen
Ukraine’s reliance on Russia.”
Because of Ukraine’s “reliance on Russia,” Moscow was able
to exert diplomatic pressure that forced Yanukovych to back out of the trade
agreement with the EU and accept terms that thwarted Ukraine’s independence and
sparked the protests resulting in his ultimate ouster.
What will happen next is anyone’s guess. In the
Washington Post’s February 23 coverage of the story, the Carnegie Moscow
Center’s Lilia Shevtsova is reported as saying: “Ukraine’s fast meltdown caught the
Kremlin off guard.”
Other Eastern European countries have been watching and
are taking steps to reduce their dependence on Russia.
A report on energy security in the FT, states:
“The Lithuanians insist that they will no longer tolerate paying some of
Europe’s highest gas prices or live with the perpetual sense of vulnerability
that comes from knowing that Russia could shut off pipelines at any moment in a
political dispute.” Vaclav Bartuska, the Czech Republic’s national energy
ambassador says: “The Russians tailor their negotiating position to each
country’s weakness. …They know how independent you are and factor that in.”
For the Eastern European countries, Liquefied Natural Gas
(LNG) is seen as their salvation.
Poland is due to complete a large LNG import terminal on
the Baltic this year—and Poland is already supplying some of Ukraine’s natural
gas needs.
If President Obama wants to help our allies, he can do so
without having to fire a shot. Now that U.S. natural gas supplies are so
abundant, thanks to the companion technologies of horizontal drilling and
hydraulic fracturing, he can expedite the permitting of LNG export terminals on
U.S. shores and encourage Congress to overturn the restrictions that prevent
exporting natural gas to any country without a trade agreement. Rep. Michael
Turner (R-OH) has already proposed the Expedited LNG for American Allies Act.
The FT reports: “The EU’s access to American LNG exports
is one of the most critical questions in determining Europe’s energy security
and industrial competiveness.”
Ukraine knows that developing its own resources is
imperative to its energy security. Being dependent on Russia for its natural
gas has forced Ukraine to abandon a trade agreement with the EU—lessening its
independence and renewing ties with its former master.
As this current conflict highlights, he who controls the
energy controls the people—and this is why America’s continued energy abundance
is important for our own energy security and that of our friends.
The author of Energy Freedom, Marita Noon serves as the
executive director for Energy Makes America Great Inc. and the companion
educational organization, the Citizens' Alliance for Responsible Energy (CARE).
Together they work to educate the public and influence policy makers regarding
energy, its role in freedom, and the American way of life. Combining energy,
news, politics, and, the environment through public events, speaking
engagements, and media, the organizations' combined efforts serve as America's
voice for energy.
No comments:
Post a Comment