It’s Not Me It’s You: Understanding the Ukranian Russian Natural Gas Pipelines

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After a breakup, it can be difficult to split up the things that you once shared together. Whether it be dividing up your friends or divvying up your old favorite hangouts, the practicalities of creating a new life after a relationship can often be hard. For a relationship that has more drama than a daytime television series, the now hostilities between Ukraine and Russia are proving how difficult it can be to move on from their once loving relationship. While the world has their eye to see how these two will handle their old shared seaside getaway, Crimea, there’s another piece of the puzzle drawing some international concern- the pipelines that pump Russian natural gas to Ukraine and Europe.

As Ukraine gave Russia the harsh, “it’s not me, it’s you,” line by ousting the former pro-Russian Prime Minister Yanukovich, the world is not expecting Russia to take the breakup well. Call it jealousy or hurt feelings, but Russia has shown in the past that it does not deal with breakups well, especially concerning it’s once darling- Ukraine. Russia knows Ukraine extremely well, including exactly how to annoy it. So like a vengeful ex, many expect the Kremlin to do something that will really irritate the Ukraine- like cutting off it’s supply of natural gas which covers anywhere between one half to one third of its energy needs.

To make this move even more likely, while Ukraine has recently been getting a governmental makeover, it again skipped out paying its gas bill to Gazprom. Gazprom is the state owned energy giant major with ties to the government- it was once led by current Russian Prime Minister Dmitry Medvedev. This growing debt from Ukraine was previously overlooked when the two were on friendlier terms, but that could really change now. When Gazprom isn’t happy, Russia isn’t happy and vice versa. So as Russia gets over it’s hurt feelings from Ukraine, it is probably that this will reach over to the energy market. While it is still unknown what will happen, it is possible that Russia could cut off its gas supplies to Ukraine.

Yet, as much as Russia is tempted to show Ukraine what it’s missing by breaking up, it’s not that simple. The energy sector is big business for Russia- it makes up around half of Russia’s total budget revenue. European accounts make up nearly a third of Gazprom’s total gas sales, and much of that goes through Ukraine. In general, the Russian gas supply to Europe makes up for an estimated 3% of the Russian economic output. While 3% might not sound so high, that’s nearly $100 million a day- a chunk of change that no one would part with easily.

Concerns about Europe’s access to natural gas is nothing new, as we can see from some earlier episodes of the Russia Ukraine saga in the last decade. Before 2006, Ukraine was getting a generous “friends and family discount” for natural gas from Russia- which was a pretty big perk for the economically developing Ukraine. Increasingly,  much of the energy infrastructure of Ukraine remains from its days in the Soviet Union, therefore making it very easy to stick with Russia for its energy needs. But then in 2006 after the Ukraine began flirting with the EU and NATO, in what many view as a jealous backlash, Gazprom demanded quadruple its natural gas prices for Ukraine. When the countries weren’t able to come to an agreement, Gazprom completely cut off supplies, leaving a lot of Ukrainians out in the cold.

This lovers’ quarrel inevitably made its way to Europe- almost eighty percent of EU’s Russian provided natural gas was going through Ukrainian pipelines then. Many European countries were pinched for gas until finally Ukraine and Russia made up and came to an agreement. Later on again in 2009, the same dispute came about as Russia again increased its prices for Ukraine. Unable to pay the higher prices, Ukraine again saw their supplies cut off. This time though, Gazprom initially continued to use the gas to transport supplies to European consumers, but after accusations of Ukraine siphoning portions for themselves, cut off the supply completely. All of this during a very harsh winter, making for some very cold and angry Europeans.

Meanwhile Ukraine and Europe, who had developed some serious trust issues with Russia, decided it would start dating around. Not wanting to be so monogamous with Russian energy anymore, Europe began seeking opportunities to diversify its energy resources. Nuclear, renewables, and coal were all getting more invitations to join the European energy party. Energy diversification is still a high priority for many countries and has fueled many in Europe to push strongly for fracking as a means to acquire natural gas, ignoring large public disapproval and scientific warnings.

Also, Europe being hesitant about Russia and Ukraine’s on and off again relationship but wanting to remain on friendly terms with Russian energy, helped support a new Northern European Gas Pipeline. In an agreement between the Russian and German governments, the Nord Stream pipeline was opened, giving Europe access to Russian natural gas through under the Baltic Sea. Next year Gazprom also has plans to the South Stream pipeline through the Black Sea that will also bypass Ukraine. These new pipelines make the EU less sensitive and likely to interfere between Russian/Ukrainian drama- which could make Ukraine less self confident when up against Russian aggression.

Never far from any international drama, the US too has recently entered the picture. In a means to tempt Europe even farther away from Russian energy resources, it is quickly working on the technology and legislation that would enable it to ship its own natural gas across the Atlantic. Today the US is the world’s biggest natural gas producer thanks to the “shale gas revolution” and is eager to use this boom to weld international influence.

In the past month, the US is increasing its rhetoric that natural gas could be the means to show up Russia. To get US natural gas supplies to Europe, natural gas must be converted to a liquefied form (LNG), which is yet to be approved by the US government. Not only are pro-natural gas politicians from the US urging this development, the Visegrad group (Czech Republic, Hungary, Slovakia, and Poland) recently wrote to the US Congress lobbying for LNG exports. Moving away from Russian energy dependence for these EU countries is particularly pertinent given their former Cold War era relationship.

Yet not everyone in the US sees LNGs as the solution to scare off Russia. Terminals to ship off LNGs do not exist currently and predictions believe that they won’t until 2015- at the earliest. More so, only in 2019 could we expect to see large volumes out. Both of these make many skeptic that this could provide any actual solution to the very real threat Ukraine currently faces against Russia.

Like living next to neighbors who are constantly fighting in an apartment with very thin walls, if Russia does cut off energy to Ukraine, it will be heard in Europe. As much as the EU would like to keep this out of their list of problems, as long as there is fighting going on between its neighbors- it’s not going to get a good night’s sleep, especially when energy concerns are at hand. Furthermore, even if Gazprom decides that its European customers are more important than another fight with the Ukraine, Brussels can probably expect more sleepless nights in the upcoming months as it goes to help Kiev in either couples counseling or a separation agreement with Moscow.

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