Sunday, March 27, 2022

The economic reasons Russia wants to annex Ukraine ..oil and gas sales to Europe

In 2014 a column I wrote was published in the local paper, the Sky Hi News...in the wake of Russia's takeover of Crimea. I found it in my blog archives, and it explained why Ukraine was so important to Russian sales of natural gas to Europe. It is an element of why Russia wanted to take over Ukraine...not only because of so religious/political manifest destiny but of naked economic interests. It is an angle lost in speculating what was motivating Putin's invasion of Ukraine. Ukraine was essential to Russia's sales of oil and gas to Western Europe...and especially Germany. It also explains why elements in Germany made it difficult for Biden to get them on board for a unified NATO response to the invasion and the earlier takeover of Crimea by Russia. Liquefied natural gas needs special handling at specially built ports if it is going to be an alternative to Russian gas, but Germany has no such ports, though some are under construction. It was planning to rely on the pipeline avoiding Ukraine with Nord Strom, now paused as part of the objection to Russia's war on Ukraine. This policy was influenced by a former German chancellor, Gerhard Schroeder who now sitis on the board of a Russian oil company. Other European countries have such ports already built. LNG_in_Europe_2018_-_An_Overview_of_LNG_Import_Terminals_in_Europe.pdf (kslaw.com)

Whatever the outcome, the Crimea and Ukraine crises have made western Europe painfully aware that they had become so dependent on Russian gas and oil , they were unable to react forcefully. Russia had become the master of their foreign policy souls. A western European backlash, to seek more energy independence, would mean unintended long term consequences for Russia.
Our family has been dismayed at the return of tense relations with Russia. Post Communism so many of our east European friends have enjoyed the warming of relations, the freedom to immigrate or travel, and a much improved standard of living. However, we also have been close hand observers of Europe’s recent and ever increasing dependence on Russian gas and oil. One third of Western Europe’s energy comes from Russia and other countries once in the Soviet sphere of influence depend 100% on Russian oil and gas.
Much of our family is related by marriage and blood to Austrians and Croatians and over the past 40 years we have made nearly annual trips to that part of the world. We have observed Croatia’s increasing dependence on Russian energy. In Croatia, my sister in law’s apartment is heated by its gas. (around 30% of Croatia’s natural gas is Russian). On their Dalmatian coast, Russia’s Gazprom has recently bought service stations to fuel the tourist trade.
On a trip through Romania three years ago, we crossed the Ploiesti oil fields, site of World War II air battles. Rusting oil refineries and storage tanks dotted the fields and a large pipeline carrying Russian oil bordered it. “ But why?””, I asked our guide, remembering Romania was once a famous oil producer. “ It is cheaper to get it from Russia”, he replied.
That viewpoint is changing, however. Romania is 25 to 35% dependent on Gazprom gas, but it has 15 years worth of gas reserves itself, which it will soon begin tapping . Their energy prices will rise, but they have already planned to take advantage of lower consumption to gain more energy independence.
SETimes (http://www.setimes.com) shed more light on the dilemma facing Europe using oil and gas policy to bridle Russian ambitions. Boycotting Russian oil and gas could backfire on them. Gazprom is the sole provider of their energy for Poland, Hungary, Slovakia, Bulgaria, Finland, and the Baltic states. Albania, Bosnia and Herzegovina, Kosovo, Macedonia, Moldova, Montenegro and Serbia also are strongly dependent on Russian gas.
Petro policy can also backfire on the Russians. 53% of Russia’s annual gas export pipelines cross the Ukraine. Control of the Ukraine is critical to them.. But any loss of Western markets could seriously damage the Russian economy fed heavily by petro income and diminish Putin’s domestic support..
In June the EU will present a plan for reduction of energy dependence on Russia, including developing more renewables and their own shale gas, increase imports of liquified natural gas from Qatar and the US, improving pipeline infrastructure within the EU and reviving eastern European gas fields. While the plans will take time to realize, just the threat of implementation being formalized now should give Russia some serious second thoughts as they ponder the long term unintended consequences of their recent policies.
A version of this was published in the www.Skyhidailynews.com today...print and on line.
Russia’s unintended Ukrainian fallout | SkyHiDailyNews.com
Russia’s unintended Ukrainian fallout | SkyHiDailyNews.com My column published April 18, 2014
Note: April 16, 2014; FiscalTimes thinks that unlike in the past, Europe this time will actually take action to establish an EU energy policy and that they can call Putin's buff because they have large reserves of gas after a mild winter. http://www.thefiscaltimes.com/.../How-Europe-Could...
From SETimes April 16
Kremlin threatens gas supplies to Southeast Europe
16/04/2014
Several nations receive Russian gas via Ukraine. In other business news: Albania's credit rating sees improvement and Turkey's military spending surpasses Canada.
photo
The EU says Russia should not politicize its contractual shipments of gas. [AFP]
In a letter to several Southeast European nations, Russia's President Vladimir Putin threatened to shut off gas supplies to Ukraine. The letter, which is intended to increase pressure on Kyiv as Kremlin-backed troops stir insurgency in eastern Ukraine, warned of action unless Ukraine starts repaying its debt and unless the EU agrees to joint talks with Russia on the country's economic future. The European Commission responded in a statement and said it expects suppliers to stick to their commitments. The letter was sent to 18 European heads of states that depend on Russian gas transit via Ukraine, including Bulgaria, Croatia, Greece, Romania, Bosnia and Herzegovina (BiH), Macedonia, Moldova, Serbia and Turkey..
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