Putin, Ukraine, and Nord Stream II

Russian aggression towards Ukraine has not changed much in a while so I have not blogged about it. Lies are spread about Ukraine every day on Russian news and on the internet. Cyber warfare keeps our IT people working overtime. Militarily, every day is much the same. Cease-fire agreements are made, and the Russian side continues to attack several times a day along the front line, with Ukrainian casualties of one or two killed and a few more wounded every day. Russia continues to support their proxies with money, munitions, equipment and of course officers and specialists, all the while denying that fact.

A couple of things have happened just recently that may signify a change for the worse. In April, Putin massed 100,000 troops and heavy equipment along the Ukrainian border complete with full operative logistical support. Most of them are still there. Then last month Russia has (illegally) threatened with bombing any “enemy” ship passing within their (illegally claimed) 12 mile limits around Crimea.

And finally, Putin self-published a 5000 word paper On the Historic Unity of the Russian and Ukrainian People in which he attempts to tell Ukrainians that their statehood is an accident, their resistance to Russian aggression futile and their fate as a people inextricably tied to Russia’s. His conclusions are questionable and the whole thing has nothing to do with history as a modern academic discipline.

Russian President Vladimir Putin is obsessed with pretending that Ukraine does not exist and that Ukrainians have no independent agency. Putin presents the Soviet Union as the savior of Ukrainian reunification. “In 1939, lands that had previously been seized by Poland were returned to the USSR. Their main part was given to Soviet Ukraine.” Putin shamelessly concludes that “contemporary Ukraine was fully created by the Soviet epoch.” And declares Russia always treated Ukraine “with great love.”

Putin has long expressed sympathy for the Russian Empire and his new article vividly manifests this worldview. He sees Russian Federation, not as a new state that emerged after the collapse of the USSR, but as a direct continuation of the Russian Empire. Putin interprets the nation not as a civil phenomenon, but as an ethno-religious community. This imperial mentality is incompatible with modern international law and is dangerous for all of Russia’s neighbours. The President of Russia calls today’s Ukraine “our historical territory” although it would be more correct if the Ukrainians called the region of Muscovy “ours”, since initially it was ruled by the Kyiv princes.

Putin can’t deal with two peoples who are similar in many respects but who want to live separately. And he is prepared to use force to achieve full domination of Ukraine as he did in Crimea and is doing in the Donbass. From the point of view of the West, his actions are those of an aggressor; but from Putin’s point of view, what he has done is an internal matter because they are already properly Russian. Putin considers present-day Ukraine ‘the anti-Russia,’ that is as simply “one more Western project the struggle against which is what he supposes is his mission handed down to him by the Moscow princes.”

To put Putin’s conclusions in perspective, imagine Boris Johnson declaring that the Great English nation includes the Scots, the Welsh and the Irish, based on their common history. It is as accurate historically as Trump’s 1776 report. This linked article is a hilarious satirical take off on Putin’s approach according to which anyone except the Ukrainians formed the nation in Ukraine by applying the Putinist approach to Russia.

Ukraine is taking Putin’s paper seriously as it is almost a declaration of war. Arseniy Yatsenyuk, the former Prime Minister of Ukraine said, “Putin’s mission is to restore the greatness of the Russian empire.” Ukrainians overwhelmingly believe that they are a different nation and want to continue building their national state and overwhelmingly want to escape the historic domination, occupation, colonial exploitation and repression by Russia. Putin’s own stance now appears to be hardening. If he acts upon the precepts he enunciates in his essay, it could transform the East-West confrontation into something much nastier and more foreboding.

The second major item with a bearing on Ukraine’s future and perhaps more dangerous to the country’s future as an independent state are Russian pipelines encircling the former East Bloc countries under the influence of the USSR, in particular Ukraine. Nord Stream II, the pipeline under the Baltic Sea linking Russia directly with Germany will double the volume of Nord Stream I to a total of 110 bcm/y. TurkStream pipeline starts from Russia’s Krasnodar region, crossing the Black Sea to the receiving terminal in Turkey. It consists of two lines with a capacity of 15 bcm/y each. The first line is already in operation, delivering 15 bcm/y of gas to Turkey for its internal needs.  The second line is designed to run from Turkey to Bulgaria, across Serbia to Hungary and Slovakia.

Gas Pipelines from Russia to Europe

Nord Stream II (NS2) for years has been a source of friction within Europe and between Europe and America. Germany supports it very strongly. Ukraine sees it as “a noose around its neck.” USA says it puts too much power in Russian hands. Putin says America just wants to sell LNG to Europe.

Gazprom has reduced supply to Europe to a contractual minimum through existing pipelines across Ukraine, driving prices up and reducing Europe’s ability to replenish stockpiles which are currently at 50%. Gazprom says that when NS2 goes on stream there will be lots of gas for Europe. That is rather compelling evidence that Gazprom, which wholly owns NS2, will try to force the hand of Gazprom to ensure that it is not just completed, but that it also receives all European Union (EU) regulatory clearances rapidly. Failure to do so will ensure that Europe and Ukraine will freeze in the dark this coming winter.

Gazprom has several times in the past decades used gas supplies as political weapons. One expert identified approximately forty politically motivated Russian energy cutoffs between 1991 and 2004. From 2014 to 2015, Russia attempted to cut off Slovakian, Hungarian, and Polish supplies in order to forestall contracted Russian gas being resold to Ukraine via reverse flow.

 

However, the 2009 crisis resulted in a new EU law that the pipelines and the suppler must be independent of each other, that the pipelines can be used by supply competitors and that there must be tariff price transparency. Gazprom will fight this tooth and nail as it challenges their monopolist position.

A new pipeline will not increase supply, it will simply divert it from one pipeline to another. Reduce gas flow through Ukraine and its pipelines become uneconomic and then scrap. Then EU loses a significant energy security hedge that stems from the huge capacity of the Ukrainian transit network, which has 146 bcm of pipeline capacity and 32 bcm of storage capacity. This sort of capacity makes it possible to meet peak demand, manage atypical supply surges, and support the intermittent availability of renewable power.

And the effect of the loss of that route, in addition to the flooding of the west to east interconnectors, is to make it much more difficult for competitors to enter the gas market in the region, effectively splitting the Northwest European market from the Central and Eastern European market

Nord Stream 2, therefore, is likely to have a very problematic journey through the EU’s energy liberalization regulatory clearance regime, and Gazprom is making that journey more problematic by seeking to manipulate gas supplies to ensure it obtains all the necessary clearances to operate the pipeline. The Kremlin by attempting to blackmail Europe, is inadvertently in the process of triggering an existential threat to the European Union which will force the EU institutions and member states to robustly oppose it.

In the course of this conflict, the operation and functioning of Nord Stream 2—and who supplies gas to the European market—will become secondary issues to that of sustaining the EU’s legal order, the entire basis upon which the EU operates. The Kremlin’s public willingness to manipulate the supply of gas and send the price spiraling upward in order to force its pet energy project through the EU’s legal machinery will lose Moscow the support of most of its remaining allies. It also opens up the prospect of EU action, supported by the United States, to seek to remove Gazprom as a major supplier in Central and Eastern Europe, and limit the amount of gas EU states as a whole take from Gazprom.

So where is America in all this? At the June 16, 2021, Geneva Summit with Vladimir Putin, President Joe Biden told President Putin, that we need to have some basic rules of the road that we can all abide by.” The “rules of the road” were legislated by two global wars. They are the predicate for international relations in all respects, including cooperation on climate change, arms control, COVID-19, and cyber as sought by Biden. Rule #1 is territorial integrity and inviolability of borders, yet Biden did not place Russia’s de-occupation front and center . . . or anywhere. Instead of requiring reinstatement of the rule, Biden simply repeated “unwavering commitment” to Ukraine. 

Everyone gravely intoned Putin’s lecture that the resolution of “the conflict” must be in accord with Minsk agreements. America (and Europe) is in lockstep with Russia’s ukase that Ukraine must surrender key aspects of its national sovereignty under the coercive fraud of Minsk. Russia, a rogue state, uses Minsk to displace the United Nations Charter, Helsinki Accords, and all else that constitutes the “rules-based international order.”

As of yesterday (July 21), Biden and Merkel have settled their disagreements over NS2. Germany will invest in Ukraine’s green technology infrastructure, and Berlin and Washington will work together on initiatives to mitigate Russia’s energy dominance in Europe. The decision drew immediate criticism from Russia hawks in Congress as well as Ukraine and Poland. However, “the Biden administration by contrast recognizes that the United States has more important foreign policy problems than a faraway pipeline, not the least of which is the geopolitical competition with China. Those problems require a strong alliance with partners like Germany.”

Under the terms of the deal, the U.S. and Germany committed to countering any Russian attempt to use the Nord Stream 2 pipeline as a political weapon. And, they agreed to support Ukraine and Poland, both of which are bypassed by the project and fear Russia's intentions, by funding alternative energy and development projects.

The two sides committed to supporting a $1 billion fund for Ukraine to diversify its energy sources, of which Germany will provide an initial $175 million grant and appoint a special envoy to help Ukraine negotiate an extension of its transit contact with Russia up to 10 years. Germany also guaranteed that it would reimburse Ukraine for gas transit fees it will lose from being bypassed by Nord Stream 2 until 2024, with a possible 10-year extension. Germany also agreed to press for sanctions in the event Russia attempts to use its energy clout as a weapon against Ukraine, according to the joint statement signed by Washington and Berlin

Kremlin spokesman Dmitry Peskov said that Russia would never use gas and oil as levers of political pressure. But last month Putin warned that Ukraine would have to show “good will” if it wanted gas transit to continue. 

How this plays out remains to be seen. Russian agreements are worthless and apparently so are agreements to defend the borders of Ukraine for giving up nuclear weapons. I wouldn’t give a plugged nickel for all the promises from Germany and Biden either. But if Ukraine falls, given Putin’s mission to reconstitute the former Soviet Union as the Russian Empire, eastern and central European countries should be worried. So should the rest of the “free world”.