Robert Rand, BURN Editor
In Europe, during the sub-zero winter of 2009, a nasty energy pricing dispute between Moscow and Kiev prompted Vladimir Putin, the Kremlin leader, to cut off natural gas exports to Ukraine, which receives 70 percent of its gas from Russia.
On the sidelines of that quarrel stood the rest of Europe, which depends on Moscow for nearly a third of its natural gas requirements. Since 80 percent of that gas flows through pipelines in Ukraine — pipelines that were decommissioned by Putin’s action — much of central Europe was affected, with supplies either reduced or completely cut off at a time of peak demand. It was the European Union’s worst ever energy crisis.
“It’s freezing cold outside,” one resident of Sarajevo, Bosnia-Hercegovina, told the BBC at the time. “Our gas heating stopped working…. We wear as many clothes as we can and wrap ourselves in blankets.”
“We are beginning to feel the effects of the gas cut-off,” said a man in Budapest, Hungary. “Now it’s cold inside as well as outside…. Last night we called a repairman about the heating but he said that he is getting calls from everyone and there’s nothing he can do about it.”
Now, five years later, Moscow and Kiev are at it again, this time with loaded pistols. The revolution that toppled Ukraine’s pro-Russian leadership ostensibly caused the faceoff. But behind the current conflict — behind the rapidly breaking news of troop movements and threats of war — is an energy security problem that could again entangle all of Europe if the Kremlin decides to lash out.
The reason: Russia remains a Goliath-like provider of natural gas to Ukraine, and to a lesser extent, to the West. In other words, Vladimir Putin controls a rather large on/off energy button. If so inclined he could use it.
Here in a nutshell is what’s at stake, neatly articulated by Edward Goldberg, a professor at Baruch College, in an interview with thefiscaltimes.com:
“The reality today is that Russia supplies 31 percent of EU gas imports, 27 percent of crude oil imports, 24 percent of EU coal imports, 30 percent of total EU uranium imports, and is the EU’s third-largest supplier of electricity. In turn, the EU is not only easily Russia’s largest trading partner, but it is the market for 88 percent of Russia’s oil exports, 70 percent of its gas exports, and 50 percent of its coal exports.”
It’s worth remembering that energy was the point man in the ongoing Russia-Ukraine affair. Late last year, Kiev was prepared to move closer to the EU, economically and politically. That was a popular idea in much of Ukraine. But Russia, whose interests in Ukraine go back many centuries, objected. Putin wooed Kiev by promising to reduce the price of natural gas by a hefty one-third. Ex-Ukrainian president Viktor Yanukovych agreed and pivoted away from the EU. That’s when the revolution found its footing and Maidan rose to the level of Tiananmen as one of history’s most famous squares. Within two months, the pro-Russian Yanukovych was gone. And the EU was voicing support for the government that replaced him.
The Kremlin has accused the EU of seeking a sphere of influence in Ukraine. As of this writing, nobody in Putin’s camp has publicly threatened to retaliate by cutting off EU energy access. But over the weekend, as Moscow seized control of Ukraine’s Crimean peninsula, a spokesman for Gazprom, Russia’s state gas company, warned that Kiev is likely to lose the gas discount promised by Putin. Another Russian energy official said it would be “stupid” to extend the discount under current conditions.
If developments in Ukraine continue to escalate and the EU and U.S. respond with sanctions against Russia, it’s possible that Moscow could shut down the pipeline of energy exports to Europe as it did in 2009. Since that time, however, thanks in part to the growth of U.S. shale gas production, there are alternate gas suppliers around, and a Russian cutoff probably wouldn’t sting as much. But if Vladimir Putin does use the energy weapon against the West, memories of that cold winter five years ago will fade in the face of something that will look more like another Cold War.