The Ukraine Crisis in the Shadow of Global Energy Competition

The Ukraine Crisis in the Shadow of Global Energy Competition

Russia’s annexation of Crimea and the events revolving around Ukraine have brought forward the question of whether this is a new Cold War between the West and Russia.  Analysts give various answers to this question in terms of military security and economic cooperation[i], however they ignore the energy competition between the US and Russia which is taking place behind the scenes of the Ukraine crisis.

In this regard, shocking decision taken by Bulgaria on August 19 to halt all of its operations  with regard to Russia’s South Stream Natural Gas Project, a project proposed by Russia as an alternative to natural gas pipeline that transits through Ukraine and on which Bulgaria is a transit country, has been overlooked. (Map 1)[ii]. Taking into consideration that the European Union (EU) Commission increased the pressure on those countries which are projected to profit from the South Stream on account of ‘Third Energy Package’, especially after Ukraine Crisis; Bulgaria’s decision was not a surprise. Third Energy Package rules out natural gas producer companies to access direct distribution network. It is obvious that the package targets to the Russian energy giant Gazprom, standing as both an energy producer and the owner of the pipeline. Thus, Bulgaria’s decision which was taken under the pressure of EU Commission can be considered as an extension of Western sanctions applied on Russia owing to its aggression in Ukraine Crisis. Since last July, the US and EU have been applying severe sanctions on Russia which are reminiscent of Cold War times[iii]. These sanctions include financial restrictions and prohibition of energy technology transition. Desperate times lie ahead of Russia as it will be lacking the financial and technological resources of the West. Russian energy projects such as LNG Terminal and South Stream Natural Gas with 63 billion m3 ultimate capacity are among to be hurt mostly by such loss.[iv]

Map 1: South Stream Project 

harita1

Source: http://turkish.ruvr.ru/news/2014_06_05/Bulgaristanda-insaatcilar-Guney-Akimin-durdurulmasindan-endiseli/

South Stream is dividing the EU

At this point, what is interesting is that Bulgaria’s negative attitude on the South Stream actually is not beneficial for its own energy security. In fact, 100% of the natural gas that Bulgaria consumes is supplied by Russia (Map 2). It is not very rational that Bulgaria has vetoed being the transit country in the South Stream at the expense of deteriorating its relations with an energy giant like Russia. Similarly, many European countries which will benefit from the South Stream such as Serbia, Hungary, Slovenia, Austria, Germany and Italy confront the same dilemma with Bulgaria. In other words, Russia’s South Stream has divided the EU.[v]

Map 2: Europe’s Natural Gas Dependency on Russia 

harita2

Source: http://www.aljazeera.com.tr/gorus/ukrayna-krizinin-enerji-boyutu-ve-turkiye

The South Gas Corridor as an Alternative

The crucial question at this point is: To what extent is Russia a reliable supplier to create a secure environment for EU to import natural gas? After the Ukraine crisis, it is more commonly said that Russia is not a reliable supplier and EU needs to hurry to diversify its suppliers. Some proponents of this idea also emphasize the Southern Gas Corridor project which has been on the agenda of EU since 2008. This corridor has been projected to enable importing of non-Russian natural gas to Europe via route that Russia is not included. (Map 3)[vi].  To some extent this project is the political continuation of East-West Energy Corridor that passes through Turkey and has been supported by the US with its Silk Road Strategy Act to break the energy monopoly of Russia in the Caspian Basin since the end of 1990’s[vii]. While the Baku-Tbilisi-Ceyhan Crude Oil Pipeline has constituted the oil pillar of the corridor mentioned above, Baku-Tbilisi-Erzurum (BTE) Natural Gas Pipeline, on the other hand, is the natural gas anchor. There is another project that is planned to connect the wide natural gas fields of Turkmenistan to the East-West Energy Corridor via Caspian Sea, however it has not been put into effect because of both Russian and Chinese political and economic influence on Turkmenistan besides the problems about Caspian Sea’s political ownership. On the other hand, the Southern Gas Corridor is envisaged to provide an opportunity for Europe to import non-Russian natural gas, from Azerbaijan’s Shah Deniz II gas field being in the first place, via Turkey with the help of TANAP and TAP.[viii] To what extent the Southern Gas Corridor which is projected to offer 16 bcm by year 2019 –while Turkey keeps 6 bcm of it, is going to provide an alternative to Russian gas for the European market that has to export 450 bcm natural gas export per year, will be dependent on the addition of alternative gas providers in the region, particularly Iran, Turkmenistan and Iraq. Yet, in addition to the Caspian Sea’s uncertain status and the ongoing nuclear discussions with Iran there are other geopolitical risks preventing this project to be implemented: 1) The question of Iraq’s future, 2) Energy terrorism (ISIS, PKK, etc.), 3) Volatile Nagorno-Karabakh conflict between Azerbaijan and Armenia while Russia is the main actor in the backstage.[ix]

Map 3: Southern Gas Corridor

harita3

Source: http://www.bp.com/content/dam/bp/images/large-images/Map-of-Shah-Deniz.png

Unconventional Energy Revolution[x] and US

Another group which underlines the need for the EU to diversify its energy suppliers for the sake of its energy security is led by the US. They point out the significance of the shale gas which is projected to be exported by the US in the forthcoming years within the strategy of “Unconventional Energy Revolution”. [xi] Indeed, reports that were recently published by the International Energy Agency (EIA) and The United States Information Agency (USIA) foresee that the US will become a new energy superpower thanks to its superiority over unconventional energy resources within a decade. US is more likely to take the place of both Saudi Arabia in crude oil field and Russia in natural gas field. According to Mehmet Öğütçü, president of The Bosphorus Energy Club, if the US Congress passes the legislation that allows the import of shale gas, a world-shaking energy revolution could take place in terms of the economy, geopolitics, competition and prices.[xii] Therefore, energy may be added as an agenda item in the ongoing TTIP (Transatlantic Trade and Investment Partnership) negotiations.

Taking into consideration these discussions regarding the global energy competition in the background of the Ukraine crisis, Russian President Vladimir Putin’s claim that ‘the U.S. is trying to block South Stream with the purpose of exporting its natural gas to the common market’ is appropriate.[xiii] It is possible to argue that Russia is not going to cancel the South Stream as Russia will not be able to direct its natural gas that is produced in the western part of the country to the Asia-Pacific market in short term. While connecting Russian gas to the Southern Gas Corridor emerges to be the ideal solution for creating regional peace, the increasing level of global energy competition between US and Russia is likely to impede this option.

Associate Professor Emre İşeri, Yaşar University, İzmir

Please cite this publication as follows:

İşeri E. (November, 2014), “The Ukraine Crisis in the Shadow of Global Energy Competition”, Vol. III, Issue 11, pp.35-41, Centre for Policy and Research on Turkey (ResearchTurkey), London, ResearchTurkey. (http://researchturkey.org/?p=7308)

Endnotes

[i] See.,Nurşin Ateşoğlu Güney, “Ukrayna krizi sonrası yeni bir soğuk savaşa mı?”, Star Açık Görüş, 26.04.2014, http://haber.stargazete.com/acikgorus/ukrayna-krizi-sonrasi-yeni-bir-soguk-savasa-mi/haber-875673 ;  Igor Ivanov & Malcolm Rifkind, “ The Risk of a New Cold War”, NY Times,  03.08.2014, http://www.nytimes.com/2014/08/04/opinion/the-risk-of-a-new-cold-war.html?_r=0 ; Robert Legvold, “Managing the New Cold War”, Foreign Affairs, Volume.93, Issue.4, July/August,2014,p.74-84.

[ii] “Bulgaria suspends South Stream gas pipeline Project”, BBC International, 19.09.2014,       http://www.bbc.com/news/business-28854089

[iii] “EU and US impose sweeping economic sanctions on Russia”, The Guardian, 29.07.2014,  http://www.theguardian.com/world/2014/jul/29/economic-sanctions-russia-eu-governments

[iv] “EU’s planned sanctions against Russia to hit South Stream, Yamal LNG” , Reuters,  24.08.2014, http://www.reuters.com/article/2014/07/24/ukraine-crisis-sanctions-gas-idUSL6N0PZ53X20140724?feedType=RSS&feedName=utilitiesSector

[v] Christian Oliver & Jack Farchy, “Russia’s South Stream gas pipeline to Europe divides EU” , Financial Times, 04.05.2014,  http://www.ft.com/intl/cms/s/0/a3fb2954-d11d-11e3-9f90-00144feabdc0.html

[vi] Emre İşeri,“Ukrayna krizinin enerji boyutu ve Türkiye” , Al Jazeera Türk, 15.05.2014, http://www.aljazeera.com.tr/gorus/ukrayna-krizinin-enerji-boyutu-ve-turkiye

[vii] See. , Emre İşeri, “The US Grand strategy and the Eurasian Heartland in the Twenty-First century.” Geopolitics 14.1 (2009): 26-46.

[viii] Emre İşeri & Alper Almaz, “Turkey’s Energy Strategy and the Southern Gas Corridor.” Caspian Report 5 (2013):84-95. http://www.hazar.org/content/yayinlar/turkey_s_energy_strategy_and_the_southern_gas_corridor__475.aspx

[ix] Emre İşeri, “TANAP: “21. yüzyılın projesi”, Al Jazeera Türk, 20.10.2014,  http://www.aljazeera.com.tr/gorus/tanap-21-yuzyilin-projesi

[x] International Energy Agency (IEA)’s World Energy Outlook (WEO) 2012 Report comprises significant predictions of change. The US, a conventional energy importer, has experienced an “unconventional energy revolution” due to its recent substantial advances in fracking and horizontal technologies.  Without a doubt there will be global repercussions of this revolution. Following this revolution, the US is predicted to surpass Russia both in crude oil and natural gas production within a decade. See. . See. World Energy Outlook, Paris: International Energy Agency, November 2012.

[xi] “Could U.S. Gas Boom Loosen Europe’s Energy Dependence On Russia?”, RFE, 12.03.2014, http://www.rferl.org/content/could-us-gas-boom-loosen-europes-energy-dependence-on-russia/25294169.html

[xii] Mehmet Öğütçü, “Küresel enerji ekonomisinde yeni dinamikler:

Türkiye nasıl konumlanmalı?”, ESİAD, 18.02.2014,  http://esiad.org.tr/wp-content/uploads/2014/02/Mehmet-%C3%96%C4%9F%C3%BCt%C3%A7%C3%BC-K%C3%BCresel-Ekonomisinde-Yeni-Dinamikler-T%C3%BCrkiye-Nas%C4%B1l-Konumlanmal%C4%B1.pdf

[xiii] “Putin: ABD Güney Akım’ı baltalamak için elinden geleni yapıyor”, Rusya’nın Sesi,24.06.2014,

http://turkish.ruvr.ru/news/2014_06_24/abd-guney-akimi-baltalamak-icin-elinden-geleni-yapiyor/

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