What does the Ukraine Crisis tell us about regional Energy Security?

Russia seems to be mobilising up to as many as 40,000 troops near Ukraine, if US estimates are correct. This follows Russia’s seizure of Crimea, which has triggered perhaps the worst stand-off between Russia and the West since the Cold War. As tensions escalate in the region, policy-makers across Europe have a significant dilemma on their hands with regards to energy security. For Russia, a major global exporter of natural gas, produces and supplies around 30 per cent of the gas consumed by Europe.

This is a substantial amount for a region that relies on importing natural gas to fulfill its energy demand. For decades, the EU has been a major natural gas consumer, and in recent years its own natural gas production has declined. As a result, the EU’s 28 members are now collectively the largest importer of energy in the world, with imports making up just over half of their energy supply, and approximately 60 per cent of their natural gas supply.

European countries prefer natural gas to other energy sources because of its comparative cleanness and efficiency. Europe has traditionally tried to take the lead on taking action to tackle climate change, so has looked to natural gas, largely considered the cleanest and least carbon-intensive of the fossil fuels, as a means to delivering energy security while also cutting back on emissions.

Yet because a significant amount of Russian gas is delivered to European countries by a pipeline that runs through Ukraine, the supply route is left vulnerable to the rocky relationship between the two former Soviet confederates. On numerous occasions between 2006 and 2009, disputes over gas between Russia and Ukraine led to Russia turning off its gas supply to Ukraine, leaving many areas in Europe without energy. These trade disputes often involved Russia accusing Ukraine of not paying the agreed-upon prices for its gas and diverting gas intended for the European market for its own domestic use.

Interestingly, the current crisis may have had its roots in another trade dispute over gas between Ukraine and Russia. Last December, the former pro-Moscow Ukrainian president Viktor Yanukovych abandoned a trade deal with the EU in favour of closer ties with Russia and gas company Gazprom. This sparked months of violent protests, eventually leading to Yanukovych being ousted. Russia then reacted by annexing Crimea, and now sits poised to attack other parts of the country. Russia, who claimed that Ukraine once again owed a substantial amount of money for its gas, may have twisted Kiev’s arm to sign a favourable agreement and abandon trade negotiations with Europe. Once this backfired, it may have looked to more aggressive means to assert its dominance, perhaps even to teach Ukraine a lesson.

For Europe, it has already taken a raft of measures to reduce dependence on Russian gas imports since feeling the brunt of the Ukraine-Russia disputes over the last few years. It has developed a new pipeline, the Nord Stream, which links Russia directly to Germany, reducing its reliance on the delivery route running through Ukraine. It has increased its energy storage capacity to survive a harsh winter in case of gas shortages caused by supply interruptions. In a world-first, the EU is also looking to integrate the domestic energy markets of each of its member states into a major region-wide energy grid which may come at a cost of over €1 trillion in infrastructure and investment. This is aimed at improving the efficiency of energy flows and boost regional coordination. And more importantly, it is looking at ways to diversify its energy sources. Shale gas has come up as a valid alternative.

When members of the Group of Eight industrialised nations (G8) recently decided to boycott a meeting in Russia and conduct one separate, and without Russia, one of the things they discussed was the need to reduce dependence on Russian gas. One of the ways the international community has proposed to deal with Russia’s behaviour has been to place trade sanctions on the country. But any attempt to place trade sanctions on Russia may come at a high cost to energy security if it decides to stop energy exports. Reducing reliance on Russian gas imports is a way of punishing the country by stripping it of its future security of demand.

In this respect, it is the other G7 nations who have the upper hand, it seems. Despite the leverage Russia has over other countries when it comes to owning the gas they desire, it still needs customers. If the world starts turning away from Moscow’s gas market in retaliation to its abuse of its status as energy provider, it will lose both its credibility and leverage power in the long run.

So what does the Ukraine crisis tell us about energy security in the region? It shows that there is a significant geopolitical dimension to the securing of a readily available, uninterrupted energy supply and demand. Russia has been using its clout as a major natural gas exporter to seek political gains. It abuses Ukraine as if it were a pawn in its game of strategy. However, it is now a constructive political tool to diversify one’s energy sources to cut back on the energy dependence on countries like Russia which may abuse such a privilege. Europe is now looking at diversification not just as a means to improve its own energy security, but to ensure it doesn’t always have to play into Russia’s hands.

Putin obviously has high ambitions to return Russia to its former glory. Its dominance in the global energy market has played a significant role in Putin’s plans for power projection and will continue to do so going into the future.

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