When Ukraine complains that Russia is cutting its energy supplies, it’s like a man having no money blaming the restaurant for denying him a meal. For the third time since 2006, Gazprom, the giant Russian supplier, has switched off the gas spigot, citing unpaid Ukrainian bills to the tune of $4.5 billion. This has led to accusations that the Russians are using gas as a geopolitical weapon.
Let’s get this straight — Russian natural gas keeps the lights on across Europe, which imports more than a third of its natural gas from Russia. With Germany — Europe’s economic engine — planning to phase out its nuclear reactors, it can sustain growth only by importing even more gas from Russia.
Some 22 countries have been Moscow’s customers since the 1980s; some like Sweden, Bulgaria and the three Baltic nations import 100 percent of their gas from Russia. Even during tense moments of the Cold War, the gas kept flowing. Indeed, it would be counter-intuitive — and counter-productive — for Russia to disrupt gas supplies to its European market.
You get the picture: it’s only Ukraine that has had problems with Moscow.
In theory, Ukraine is in a geopolitical sweet spot. As a major hub for Russian gas pipelines, Ukraine not only gets transit fees but also discounted gas from Gazprom. While Germany, for instance, is charged $485 per thousand cubic metres, Ukraine pays Russia just $385 per thousand cubic metres.
But instead of being thankful for the accident of geography that allows it to simply sit back and count the dollars cascading in, Ukraine has acquired a death wish. Kiev says it will only pay $285 per thousand cubic metres, plus it simply refuses to clear its multi-billion dollar debt to Gazprom.
The Russians are ready to subsidise Ukraine — and perhaps even waive part of the debt — provided the country remains within Moscow’s sphere of influence. But Kiev wants membership of the EU and, worse, hopes to join NATO , the anti-Russian alliance. This is completely unacceptable to Moscow.
Great Game of Gas
The very nature of gas makes it an extremely high stakes affair. Because gas pipelines are expensive to build and cannot be rerouted, it is normal for buyers and sellers to ink long-term — often 20-30 year — agreements. This brings together producers and consumers as well as transit countries in a sort of pipeline alliance. Because all transit nations get a fee from the pipeline owners, there is every incentive for them to have stable relations with one another.
From the American point of view, more Russian pipelines are bad news. Russia’s commercial ties with Germany, for instance, deepened after Moscow built the Siberian natural gas pipeline into the heart of Europe in the 1980s. That pipeline was built despite immense pressure from former US President Ronald Reagan, a hard-boiled Russia-baiter, to scuttle the project.
It is clear what bugs the Americans. Natural gas is, of course, lucrative business for Moscow. But Europe, which was the most impacted by the oil shocks of the 1970s, also benefits from having a reliable supplier of cheap and — relatively — clean energy. And importantly, the supplier is right next door rather than in the volatile Middle East.
It is this cozy relationship between Russia and Europe the US has for long tried to disrupt. In this mission, it has found a willing tool in Ukraine. The country, whose leaders are inspired by Ukrainians who collaborated with the Nazis during World War II, has become the rogue state of Europe.
Blinded by its hatred for Russia, Ukraine’s primary role in this new Great Game is as a spoiler. This it does by baiting the Russian bear. By refusing to clear its debts, siphoning (a.k.a. stealing) gas, demanding below market rates, and lately unleashing a murderous assault on Russian civilians in eastern Ukraine, the Ukrainians provoke the Russians into shutting down the gas pipelines. It then siphons even more gas from the pipelines, causing technical glitches at the Russian end. (A minimum amount of gas has to remain in the pipelines for the system to work smoothly end-to-end.)
The Americans hope these frequent disruptions will knock Russia’s reputation as a reliable gas supplier, forcing the Europeans to look elsewhere — Qatar, perhaps. But Europe is too closely integrated with Russia to seek alternate supplies. EU Energy Commissioner Guenther Oettinger said at a roundtable on EU energy security on 25 June that the continent’s “energy independence from Russia is impossible in the short term”.
The US’ Ukrainian gambit is the latest of several desperate — and costly — measures aimed at isolating Russia in the geopolitical and energy spheres.
Washington’s geopolitical bible is The Grand Chessboard: American Primacy and its Geostrategic Imperatives. In this baleful book, former US National Security Adviser Zbigniew Brzezinski says by creating instability in every country in Russia’s neighbourhood, especially in the Central Asian Stans and Ukraine, and disrupting the flow of oil and gas, the US can isolate Russia, so that Moscow ceases to be a great power.
Brzezinski openly espouses provoking instability by exploiting the ethnic and religious diversity of the region.
The Nabucco natural gas pipeline was one of several ways the US tried to turn this fantasy into reality. Named after a Verdi opera, the $31 billion gas bridge was conceived to divert 30 billion cubic metres of Central Asian gas (nearly 10 percent of Europe’s annual consumption) away from Russian pipelines.
However, the Russians had the foresight — and the diplomatic muscle — to ensure the project’s failure. In June 2009, when the Europeans were about to ink an agreement on Nabucco, a leading Moscow-based commentator ridiculed their “chaotic chanting”.
Alexander Knyazev, director of the regional branch of the Institute of the CIS, said the support from European nations for the project reminded him of the haunting chorus of Hebrew slaves from Verdi’s opera — “beautiful, yet altogether gloomy and hopeless”.
It was an eerily prescient remark.
Russia steps on the gas
Because Nabucco’s sole purpose was to eat Russia’s lunch, the Russians went after it with a vengeance. First, Russian gas corporations bought up all available natural gas in Central Asia and the Caspian to deny supplies to Nabucco. Then in 2007, Russian President Vladimir Putin unleashed South Stream.
South Stream is a 2,380-km, $45 billion pipeline crisscrossing Russia, Bulgaria, Serbia, Hungary, Slovenia and Italy that would carry gas to Europe and, importantly, bypass troublesome Ukraine. This month Austria jumped on board, signing an agreement with Gazprom to build the Austrian leg of the pipeline.
Plus, with the speed of a mechanised column — and against every obstacle put in its way by East European nations — the Russians, with German backing, built Nord Stream. This 1,222-km pipeline transports natural gas from northern Russia directly to Germany. Again, it bypassed the rabidly pro-US Baltic countries, thereby removing any possibility of disruptions.
Nord Stream was crucial to Russia’s energy strategy because it demonstrated to Western Europe that Moscow was serious about ensuring uninterrupted flow of energy to Europe. It deflated American allegations that Russia wanted to strangle Europe.
Putin’s twin Stream strategy paid off. In 2013, Nabucco turned into a humiliating defeat for the West, as it found no takers in Europe.
A similar fate awaits Ukraine. Once natural gas starts flowing into Europe via South Stream, Ukraine will be left with a helluva lot of pipelines that are going to be worth scrap metal. It will lose hundreds of millions of dollars in transit fees, pay more for gas (unless the Europeans resell Russian gas to them at a subsidised rate) and lose the Russian market for its agricultural produce. Plus, joining the EU might involve losing a third of its territory in the east. As they say, those whom the gods want to destroy, they drive mad first.
A major fallout of the American meddling in Europe and Central Asia is the Russians are now looking elsewhere. As economic power swings East, new Russian pipelines from the giant Siberian oil and gas fields are snaking towards China, Japan and Korea rather than Europe.
Putin’s crowning achievement was the inking of the unprecedented $400 billion deal between Gazprom and China, locking in the soon-to-be world’s biggest energy consumer for 30 years. It is worth noting that Moscow and Beijing had been unable to come to an agreement on the price of gas for ten long years. So clearly, it was Ukraine that played a catalytic role in expediting the signing.
America’s other contribution in the whole affair is consumers will pay higher prices for natural gas. “Russia’s new pipeline to China will increase competition for natural gas from 2018 and will most likely increase the cost we pay for natural gas here in the EU,” a leading British petroleum industry executive told The Guardian.
Days after the deal was struck, the Financial Express reported India is considering an ambitious plan to extend the natural gas pipeline between Siberia and China to India. If Russia can achieve the seemingly impossible task of slinging the pipeline across the Himalayas to India, then it will have a lock on the two biggest energy consumers of the 21st century. The European market will seem insignificant by comparison.
Sorting it out
Fyodor Lukyanov, the chairman of the Moscow-based Council on Foreign and Defence Policy, is positive Russia and Ukraine will sort out their issues. “Russia is ready to show more flexibility than previously, fully realising a new gas war would do serious damage to Gazprom,” he told Russia Beyond the Headlines. “But first Ukraine should at least repay the old debts, which remains a problem. Since Europe is eager to remove a possible interruption of supplies from the agenda, a compromise is possible. If a way out of the deadlock is found on gas, it will create at least some positive momentum.”
In 2006 and 2009, when the Russians shut down the gas pipelines, most of the poorer European countries had to forage for firewood for their heating. Winter is several months away and the crisis may be over by then. If not, then hundreds of thousands of Europeans will again be heading for the woods.