Natural gas may spark Ukrainian war

Fossil fuels still drive the world’s economy, supplying 80 percent of human energy consumption. They’ll do so for decades to come.

Cut off supplies and the diplomatic standoff in Ukraine may erupt into a regional shooting war.

It won’t help in the current crisis, but shale technology  – not green energy – will finally rid Europe of its dependence on Russian natural gas and oil.

The conflict involves Russian annexation of the Crimea after an illegal coup (according to Russia) deposed Ukraine’s former president, Viktor F. Yanukovych. Russia still recognizes Yanukovych as president.

Russia feels western Europe is trying to absorb Ukraine into the European Union. Other former Soviet republics have already joined the EU and NATO. Russia views that as a threat to its national security.

Russia’s Black Sea fleet has been based in Crimea for 230 years. Most Russians feel Crimea’s ethnic Russian majority wants to become part of Russia again.

Crimea was part of Russia for 200 years before Nikita Khrushchev gave it away to Ukraine as a drunken 1954 gift. Back then it was little more than a meaningless gesture. Putin wants Crimea back.

Energy policy

The great unknown is: How will Russia react if Europe and the United States impose promised widespread economic sanctions should it annex the Crimea after a referendum vote this weekend?

Russia says there will be repercussions if economic sanctions are imposed, but it doesn’t say what those will be. It did say there would be no invasion.

Russia cut off natural gas to Europe twice in recent disputes. In 2008, Russia stopped natural gas flow to Europe during Russia’s invasion of neighboring Georgia. In that conflict Russia took territory it still holds today. Russia wasn’t seriously challenged by Europe or by the United States.

This time, quite likely, the flow of natural gas will be the difference between war and peace.

Awakening the dogs of war

In the meantime, military preparations are underway. Called “training exercises”, NATO forces are moving military assets close to Ukraine. The United States sent a dozen F-16 fighter jets, AWACS (Airborne Warning and Control System) and 300 service personnel to Poland. Patrols along Ukraine’s border are to start ASAP.

In response, next door Belarus asked Russia to send it 15 fighter jets to counter NATO forces. So far, Russia has sent six jets and three transports.

Russia already holds the Crimea, taken without firing a shot. It scuttled ships in Crimea’s Danuzslav Harbor to prevent Ukrainian naval vessels from sailing. Russia moved troops northward into southern Ukraine and is conducting “military exercises” in three places just east of its shared border with Ukraine.

Natural gas influence

There are high expectations for a diplomatic solution. Should diplomacy fail, though, sanctions and natural gas politics will take center stage.

Germany’s reliance on Russian gas can effectively limit European sovereignty, I have no doubt
– Prime Minister Donald Tusk of Poland, New York Times, Mar. 13th 2014

Poland’s Tusk said he’d speak with German Chancellor Angela Merkel to make it clear to her that “existing climate and natural gas policies risk posing a threat to the security and sovereignty of Europe as a whole”.

Russia and Europe have symbiotic natural gas economic ties. Russia supplies 40 percent of Poland’s natural gas and 30 percent of western Europe’s through a vast network of Russian-owned pipelines. Seventy five percent of Russia’s foreign trade, mostly in the form of natural gas, is with Europe.

The current situation is beginning to look a lot like Georgia. This time, though, Europe has decided to take a much stronger stand to prevent further Russian aggression.

Sixteen percent of all of western Europe’s natural gas flows from Russia through Ukraine via pipelines, according to the U.S. EIA. Ukraine, Turkey, Poland and Germany get substantial portions of their total energy from Russia.

European energy transformation to begin

Unconventional techniques, like fracking and horizontal drilling, have fundamentally changed the energy future of the United States for the next half century. It’s about to change the balance of energy power in Europe.

Europe has vast untapped shale gas and oil deposits, more than enough to meet its own needs and wean itself from dependence on Russian energy. Poland, Ukraine, France and Turkey have more than enough untapped resources to meet the need. All are heavily dependent on Russia today.

To jumpstart the energy shift, last week Poland began offering shale gas companies 6-year tax breaks to develop its shale gas.

There is a move afoot in the U.S. Congress to legalize export of now abundant natural gas to Europe to compete with the Russian monopoly.

Up to now the EU has discouraged fracking and development of shale energy. But the Ukraine crisis and high cost of green energy is making the EU rethink its position. It also sees how shale gas is being used in the United States to reduce its carbon footprint and that is a primary EU goal.

Conclusions

Europe is heavily dependent on Russian natural gas. Europe, though, has vast untapped shale gas deposits of its own that can be used to break its Russian dependence.

Europe and the rest of the world will inevitably follow the United States lead and develop shale gas. It’s an economic and environmental imperative. The current crisis and national security considerations will speed up the process.

However, none of that will help in today’s Ukraine crisis.

If Russia cuts off natural gas supplies to Europe again in retaliation for economic sanctions then it will have to act quickly before it goes broke. Seventy five percent of its national income comes from energy sales to Europe. For Russia to survive, it must take back Crimea and quickly normalized European economic ties.

If that can’t happen then a desperate Russia might start a shooting war that spreads well beyond the Crimea.

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Mar 15, 2014, in economics, Economy, Energy, energy policy, environment, Europe, news, Politics, Russia, Thoughts, Ukraine. Bookmark the permalink. 1 Comment.

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