Analysis

Ukraine’s energy curse

As Ukraine signs a deal with Russia reducing its gas import price by a third, Nikolay Manov explores previous conflicts over gas supplies, and their impact on the latter’s hopes of a future with the European Union.

Dmitri Medvedev and Viktor Yanukovych sign an agreement in Kharkiv in 2011. Photo by Kremlin.ru

Dmitri Medvedev and Viktor Yanukovych sign an agreement in Kharkiv in 2011.
Photo by Kremlin.ru

It has been argued by Michael Ross and others that natural resources hinder state-building and democratic development, increasing the chances of conflict.  Although the majority of the literature on the topic has been concentrated on Africa and the Middle East[1], the conflict between Russia and Ukraine over gas supplies provides a present-day example that resource wars might be relevant to modern, developed countries such as the EU member states.

Originating after the collapse of the Soviet Union, the dispute between Russia and Ukraine over the supplies of gas escalated in 2006 resulting in a series of ‘energy crises’. On a number of occasions European countries dependent on Russian gas delivered through Ukraine faced a halt of supplies during winter periods leading to severe disruptions of their economies.

The problem with Russian-Ukrainian energy relations is complex and requires a multi-level analysis. On the one hand, Ukraine is heavily dependent on Russian gas for its domestic needs. Although the country has made attempts to diversify its suppliers, it has not done enough to wean itself off Russian gas imports completely. Second, Gazprom, the Russian state owned monopolistic energy company, not only dominates imports to Ukraine, but until this week charged the country one of the most expensive rates in Europe ($400 per 1,000 m3).

The last month witnessed efforts by Europe to cut Ukraine’s gas dependency on Russia by supplying gas from Slovakia. However, nothing has been signed due to the complex relations Ukraine has with both Europe and Russia. For instance, President Viktor Yanukovych remains reluctant to pardon Yulia Tymoshenko – a necessary step for continued European integration. In addition, gas demands should be researched and estimated before Eustream can embark on long-term projects to modify the infrastructure in order to transport gas from Slovenia ‘back’ to Ukraine.

On the other hand, Russia remains an influential player on the Ukrainian market (23.7% of Ukrainian exports go to Russia and 19.4% of the total imports come from Russia), offering leverage. The Kremlin threatened the use of other types of sanctions if a deal supplying Ukraine with gas at cheaper market prices was closed. Furthermore, with the upcoming Third Eastern Partnership Summit in Vilnius on 28-29 November 2013, Russian pressure has been used as an explanation for Ukraine’s decision to suspend negotiations with the EU.

Economic sanctions are among the most effective methods used by states to ensure compliance with their foreign policies. This is clearly demonstrated by the case of Ukraine which has tried to become politically, economically and culturally associated with the European Union rather than with Russia and the CIS. However, the threat of sanctions (im)posed by the latter has prevented the integration of the country into the European community. As tension in Kiev escalates, what remains to be seen is whether there will be another upheaval, similar to the Orange Revolution of 2004-2005, which may push the country into a pro-European direction once again.

References:

CIA Factbook Ukraine (https://www.cia.gov/library/publications/the-world-factbook/geos/up.html)

Ross, Michael “The Political Economy of the Resource Curse” World Politics Vol. 51, No. 2 (1999)

Fawcett, Louise (ed.) International Relations of the Middle East 2nd ed. (Oxford: Oxford University Press, 2009)

Russia Today Cold Winter Ahead of EU, Ukraine over Russian gas war http://rt.com/business/cold-winter-gas-war-767/

Lithuanian Presidency of the Council of Euopean Union The third Eastern Partnership Summit in Vilnius (http://www.eu2013.lt/en/vilnius-summit)


[1] Ross, Michael “The Political Economy of the Resource Curse” World Politics Vol. 51, No. 2 (1999) and Fawcett, Louise (ed.) International Relations of the Middle East 2nd ed. (Oxford: Oxford University Press, 2009)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s