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).
...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.
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