Moreover, some recent behavior of Russia regarding European energy policy is hardly reassuring. In 2009, the Kremlin withdrew its signature from the Energy Charter Treaty, a treaty already ratified by the Ukrainian parliament (though not yet fully implemented, in Ukraine). The operating companies of both Nord Stream and South Stream are, despite being primarily entrusted with the gas supply of EU member states, registered in the Swiss canton of Zug, a well-known city among observers of post-Soviet oligarchs. The ‘selective reliability’ of Gazprom as an energy supplier became apparent during the ‘cold spell’ of February 2012: Gazprom could not satisfy the increased demand for gas both in and outside Russia at the same time, and made the fulfilment of its contracts dependent on the political preferences of the Kremlin.
Often in recent years, the gas disputes between Ukraine and Russia and their implications for the EU, along with the risk of further disputes, are invoked as an argument for the bypass pipelines in the Baltic and Black Seas. Also, the current energy transportation issues in Ukraine are to a large extent the country’s own fault, having a lot to do with the rampant corruption as well as absence of will to reform in Kyiv. The Ukrainian leadership is solely responsible for the deteriorating condition of the Ukrainian pipeline network, which increases Western interest in the Russian mega projects.
However, the degree of Ukrainian versus Russian responsibility for the supply stops in the beginning of 2006 and 2009 is so far unclear. Under pressure from multiple European capitals, then Ukrainian PM Julia Tymoschenko entered a dubious new gas contract with then-PM Vladimir Putin in January 2009. That the Ukrainian leadership did not have much room to negotiate an acceptable deal for Ukraine is illustrated by the peculiar ‘take-or-pay’ conditions of the original contract, which impose extraordinary penalties upon the buyer if he does not purchase the agreed supplied quantity. Characteristically, this strange provision was temporarily suspended already in November 2009, and has recently been blatantly ignored by Ukraine. Russia seems to have accepted the treaty’s breach, has not turned to arbitration to enforce the ‘take-or-pay’ clause, and thus implicitly acknowledged the unsustainability of the agreement.
Still, this notorious gas contract from 2009 today results in a higher gas price for Ukraine than, for example, for rich Germany, in spite of Ukraine receiving a substantial discount on its Russian gas in exchange for maintaining, until 2047, an outpost for Russia’s Black Sea fleet in the Crimean port town of Sevastopol. The continuously high gas price threatens to eventually strangle the fragile Ukrainian national budget. Whatever the origins of the gas crises of the last decade, the current situation makes Moscow the clear winner of the 2009 gas dispute, in the midst of the world financial crisis. It is also noteworthy that, before that, Moscow had, over years, loudly complained that Ukraine buys Russian gas at a rate below world market prices. Yet, today Russia has no qualms to sell its gas to Ukraine at rates significantly above the price of its far richer West European partners.
Another frequently ignored fact is that Russia’s new underwater pipelines mean high costs and new risks for Europe. The South Stream pipeline (estimated construction costs: over $18bn) would be more threatened by political instability in the Black Sea region than the Ukrainian land route for Russian gas is, at the moment. Nord Stream has already made sections of the original gas transport infrastructure not only of Ukraine, but partly also of Slovakia, the Czech Republic as well as Austria useless, and will make further investments necessary to transport Russian gas from Germany to Eastern Europe.
The future role of Ukraine’s considerable gas storage facilities is also unclear, even though these have proved useful in previous extreme weather situations. Were these storages to remain empty in the future, due to the diversion of the gas away from Ukraine, the EU would be shooting itself in the foot. The East European gas issues expert Jonas Grätz (ETH Zurich) has, among others, pointed out that the overall assessment of the Baltic Sea project has to be adjusted because ‘additional costs for the construction of new storage capacities will need to be accounted for, as Ukraine possesses high storage capacities which need to be substituted in case Nord Stream replaces the Ukrainian corridor.’
Whatever one may think about the utility and reliability of the new underwater gas pipelines for the West, the bottom line is that the less Russia requires Ukrainian pipelines for its gas exports into the EU, the weaker the interdependence between Europe’s two largest countries will be. Even if – which does not appear to be the case – Ukraine forcefully starts exploiting its reserves of shale gas, for the time being there will be no alternative to large Russian gas exports to Ukraine. Implementing its Germany-supported offshore gas pipeline projects, Moscow has started to gradually free itself from its crippling dependency on the Ukrainian transport system while keeping Ukraine’s dependency on Russian gas deliveries largely intact.
Thus far, the extensive energy transfers from Siberia and Central Asia to Central and Western Europe and, consequently, the integrity of the Russian national budget as well as the reputation of the Kremlin as an energy supplier, was threatened by every increase in tension between Russia, Ukraine and Belorussia. As Russia has become increasingly able to fulfil its delivery commitments to the West without the two ‘brother nations’, the economic barriers for an escalation of political disputes are disappearing. In the worst case, this could induce the Kremlin to act as relentlessly in the Eastern Slavic area as it currently does in Transnistria, Abkhazia or South Ossetia. Berlin cannot afford to ignore such scenarios.
This article first appeared on the London website openDemocracy, and is an abridged version of the German essay ‘Berlin, Kiew, Moskau und die Röhre. Die deutsche Ostpolitik im Spannungsfeld der russisch-ukrainischen Beziehungen’, Zeitschrift für Außen- und Sicherheitspolitik, no. 3, 2013.