June 14, 2014

Energy Aspects of the Russian Aggression against Ukraine. Part 2.

Oleksiy Volovych

Part 2. European Union vs «Gazprom».

In recent years, Europe has been steadily reducing its dependence on Russian gas (from 40% in 2006 to 25% in 2014). There is every reason to believe that after the Kremlin's aggressive actions against Ukraine in the spring of 2014, this trend will substantially grow. And in 3-4 years the share of Russian gas in the gas consumption in Europe will not exceed 10-15%, which, on the one hand, will have a negative impact on the Russian energy sector and the Russian economy as a whole, and on the other — will significantly limit geopolitical ambitions of the Kremlin on the European continent.

The TANAP project intends to enable transportation of the gas of the Shah Deniz 2 field and other fields in Azerbaijan through Turkey to Europe
The TANAP project intends to enable transportation of the gas of the Shah Deniz 2 field and other fields in Azerbaijan through Turkey to Europe
http://www.hurriyetdailynews.com/

It is likely that over the next 3-5 years within the framework of the «Southern Gas Corridor» will be implemented a number of energy projects, namely the pipelines: TANAP — TAP; TCGP, Iran-Turkey-Europe; Israel-Cyprus (Crete)-Europe and supplies of LNG from Azerbaijan to Romania (project AGRI) will begin, and will increase supplies of it from Qatar and the United States to Europe, which will significantly weaken «Gazprom's» monopoly positions at the European energy market. Resuscitation of the Nabucco project is also possible, if it is filled with Turkmenistan and Iran's gas.

Georgia is interested in the project AGRI
Georgia is interested in the project AGRI - alternative to the Nabucco gas pipeline, providing for the delivery of natural gas from the Caspian sea to bypass Russia
http://www.vestikavkaza.ru/

Moscow's attempts to use the «energy weapon» against Ukraine and European countries forced the European Union to resort to the introduction of new collective counteractions. Thus, at this point in the European capitals is being discussed Poland's initiative on the creation of «European Energy Union» composed of 28 countries of the EU and Ukraine. The main objective of the initiative is to jointly oppose Moscow's energy pressures on consumers of Russian energy carriers. It is similar to the idea of ​​creating «Energy NATO», launched by Warsaw in 2006. However, at that time the West was not able to support this idea with concrete mechanisms for its implementation. Fundamental ideas and principles of Warsaw's current initiative are as follows:

- The EU as a whole, and not individual states should negotiate and sign contracts with external suppliers of energy carriers, in particular, with «Gazprom»;

- Russian energy carriers must be supplied to all EU countries at the same price;

- The EU should strengthen protection mechanisms («solidarity mechanisms») for the case of reducing or eliminating of gas and oil supplies from Russia to any of the EU countries;

- The EU should best it can finance the development of energy infrastructure in Europe, in particular, within the framework of the «Southern Gas Corridor»;

- EU countries should maximize the policy of diversification of external sources of energy carriers;

- EU countries should use to the full their own energy sources;

- The EU should ensure energy independence of neighboring countries, in particular, Ukraine and Moldova.

In our opinion, all these tasks could be implemented within the framework of the current European energy community, without creating a new structure, but intensifying its institutional capability, limited at the moment to its advisory and monitoring functions.

In early May of this year Energy Ministers of the «Great Seven» (G-7) agreed a long-term «Plan to eliminate Europe's dependence on oil and gas from Russia and to prevent the Kremlin's using of energy security as a political bargaining chip». G-7 countries are also preparing a separate plan to support Ukraine in case if in winter Russia stops gas supplies to Ukraine. It is expected that at the summit of G-7 in June will be signed «Emergency response plan to assist Ukraine in the winter of this year in the case of Russia's limiting gas supplies». The plan provides for the creation of several new liquefied natural gas terminals in Europe, the USA's lifting restrictions on exports of shale gas to Europe, investments into construction of new gas pipelines. Besides, within the nearest weeks will be developed a plan of emergency support of Ukraine’s energy needs in case if Russia turns off gas already in June this year.

Now in the European Union is being considered a global project of uniting energy systems (infrastructure of oil and gas and coal industries, electric power, alternative energy, and the like) in the countries on the shores of the Caspian, Black, Mediterranean and Baltic seas, providing for the spread of European energy legislation on the EU's partner-countries.

the Cabinet of Ministers of Ukraine should hurry up with signing an agreement on the establishment of a consortium consisting of American, European and Ukrainian companies for modernization of the Ukrainian GTS

In our opinion, the Cabinet of Ministers of Ukraine should hurry up with signing an agreement on the establishment of a consortium consisting of American, European and Ukrainian companies for modernization of the Ukrainian GTS and filling it in the future, apart from Russian, with Turkmen and Iranian gas through Odessa and Romania, and in the future — with the U.S. and Qatar LNG and shale gas from Yuzovskyi and Olesko deposits. If Russia significantly reduces or completely stops transportation of its gas to Europe through the Ukrainian gas transportation system, it can be used in reverse mode for gas supplies to Ukraine from Europe. «Ukrtransgaz» should be withdrawn from jurisdiction of «Naftogaz of Ukraine» as soon as possible. Having become a fully independent company, it will be able to enter into cooperation agreements with European and American investors for the sake of reconstruction and modernization of the Ukrainian GTS. Extremely important at this is to achieve agreements with the EU on moving the point of delivery- take over of the Russian gas to the eastern and northern borders of Ukraine, which will allow to eliminate the possibility of political dependence on Russia and to transfer the issue of gas transit to the plane of the commercial relationship between the European energy companies, «Ukrtransgaz» and «Gazprom».

In our opinion, the Cabinet of Ministers of Ukraine should immediately propose to the USA and European countries to take under military guard the trunk pipelines of the Ukrainian GTS, and to send relevant professionals who could control an uninterrupted supply of Russian gas to Europe and thus to refute «Gazprom's» baseless allegations of insecurity of transporting Russian gas through Ukrainian territory and of Ukraine's allegedly siphoning gas.

The probability of such prediction is supported by the fact that both main contenders for the presidency of the European Commission Martin Schulz and Jean-Claude Juncker are ready to repel the aggressive policy of the Kremlin
The probability of such prediction is supported by the fact that both main contenders for the presidency of the European Commission Martin Schulz and Jean-Claude Juncker are ready to repel the aggressive policy of the Kremlin

The European Union's support to Ukraine in its confrontation with Russia, particularly in the energy sector, is decisive. However, 24 — 25 May this year held the eighth elections to the European Parliament, which will form the new European Commission. Despite all the claims that, according to forecasts, the European Parliament can get a lot of so-called «Euro-skeptics», ultra-right politicians and nationalists, there is every reason to believe that the general course of the European Union in support of Ukraine will not change. The probability of such prediction is supported by the fact that both main contenders for the presidency of the European Commission — the current «left» European Parliament President Martin Schulz and the «right,» ex-Prime Minister of Luxembourg Jean-Claude Juncker, judging by their public statements, are ready to repel the aggressive policy of the Kremlin. But then, Moscow hopes that the new «Brussels bureaucracy» would be more favorable to it and Russia will manage to implement the project of the gas pipeline «South Stream».

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The revival of the Russian Empire in version closer to Stalin's, is the strategic goal of the Kremlin. The main obstacle on the way to this goal is an independent, self-sufficient and European Ukraine, because according to the plans of the Kremlin it has to become part of the empire

The revival of the Russian Empire in version closer to Stalin's, is the strategic goal of the Kremlin. The main obstacle on the way to this goal is an independent, self-sufficient and European Ukraine, because according to the plans of the Kremlin it has to become part of the empire. Since a large-scale conventional war aimed at Ukraine's joining the empire could lead to a third world war with devastating consequences for Russia itself, the Kremlin is using a set of so-called «soft power» to realize its strategic ambitions: information-propaganda operations, russification, bribery and intimidation of the Ukrainian ruling elite, destabilization of the situation in the country by supporting separatists, increasing control over the economy of Ukraine, in particular, increasing its energy dependence.

¾ of Russia's economy being based on revenues from energy resources, the main theater of «combat» actions takes place in the energy sector. Since 2006, the energy industry has become a battleground in the Kremlin's energy war against Ukraine. Over the past 8 years, Russia has been consistently and aggressively using «energy weapon». During this period there were gas conflicts, when Russia shut off gas to Ukraine, arbitrarily raised the price of it, blocked Ukraine's attempts to diversify sources of supply of energy carriers. Since such Russia's actions had actually not been condemned by international community, Russia experienced complete impunity in its energy aggression against Ukraine. During this period, Europe's dependence on Russia in gas sphere has weakened the energy security of Europe, and Ukraine remained virtually alone in its energy confrontation with Russia. Due to compliance and short-sighted self-interest of some European leaders, became possible the construction of the gas pipeline «North Stream» and the beginning of the construction of the pipeline «South Stream».

Today we are witnessing formation of a common European energy market and strengthening of unity among the EU countries on the way to energy security

But today we see that Russia's attempts to use the «energy weapon» against the former Soviet and European countries lead to the result opposite to the desired — namely, to activation of cooperation and integration between the ex-Soviet and European countries, which as a result of aggressive Russian energy policy are now «all in the same boat». «Today we are witnessing formation of a common European energy market and strengthening of unity among the EU countries on the way to energy security, which becomes more and more international by character, as no country in the world, no matter how powerful it may be, is able to solve the problems of its energy security on its own.

Today, leaders of post-Soviet and European countries understand more and more clearly that Russia will always win in the bilateral format of solving energy conflicts because it is stronger than each individual state. So today in Europe is being formed an alliance of energy consumers and transit countries with institutions of the European Union and this is a guarantee that the Kremlin's energy wars are doomed to failure. On the other hand, the economy («putinomika») of Russia is very vulnerable because it rests mainly on energy carriers exports. If Russia's monopoly at the energy market of Europe and the world gets limited, and therefore the price of Russian energy carriers are reduced, Russia's «energy weapon» will be used against itself, which will have negative consequences for the Russian economy as well as for the imperial ambitions of the Kremlin.