Fri. Sep 17th, 2021

EU energy updates

Last month, President Vladimir Putin published a sinister speech, 6,900 words article insists that Russians and Ukrainians are ‘one people’, apparently opening the door for further Russian intervention in its neighbor. Days later, the Biden administration agreement reached with Berlin enabling the completion of the Nord Stream 2 gas pipeline – which poses a serious security and economic threat to Ukraine – in exchange for thin insurance and compensation for Kiev. The “agreement” – in fact, just a statement – does Ukraine a serious service.

Nord Stream has always been a geopolitical project. This will give Russia the ability to supply almost all of its current gas exports to Western Europe under the Eastern Sea directly to Germany, which will bypass the transit pipeline around Ukraine. This will deprive Ukraine of $ 2 billion a year in gas transportation money, which is essential for an economy of only $ 155 billion.

The Russian Gazprom said the supply could continue throughout Ukraine – if European customers buy extra Russian gas (EU policy is to reduce Russia’s dependence). Putin warned that Ukraine must show “good will” – read: make the Kremlin’s bid – to continue. Kiev is rightly concerned that for Moscow, to no longer rely on Ukraine’s pipeline for profitable energy exports, would remove a major constraint on further aggression.

Joe Biden in May long renounced US sanctions on the pipeline business and says they have little sense with the project 90 percent complete when he became president. The agreement is unveiled days after he housed outgoing German Chancellor Angela Merkel in the White House, promising measures to curb Russian energy exports to Europe if Moscow uses energy as a weapon or takes ‘further aggressive action’ against Ukraine. It offers a $ 1 billion “green fund” to support renewable energy in Ukraine, and says that with US support, Berlin will use its leveraged financing to facilitate “an extension of up to 10 years” to Russian gas transportation.

The agreement is flawed at all levels. Commitments to counter Russian misconduct are vague, the green energy fund does not cover Kiev’s losses, and the offer of German aid to expand gas transport is merely a “promise to try”.

The optics are gloomy. For Washington and Berlin to conclude an agreement that is crucial to the interests of Ukraine, and no one from Kiev in the room, is a gift to Putin’s story that it is good for great powers to the fate of to determine smaller ones. Even the timing, with the German election in September, is strange. It would certainly have made sense to enter into talks with the next government of Berlin – probably also the Greens, who oppose Nord Stream.

Why did the White House enter into an agreement that also provoked dual opposition in Congress? The answer seems to be a push from some advisers to ‘park the Russia problem’ so that the US can focus on the biggest threat: China. Russia, they say, is a declining power whose influence, beyond fossil fuel reserves, comes from a nuclear arsenal that is unusable in practice. This argument, too, is flawed. Recent years have shown that Russia is a threat to European – and therefore global – security. It retains a large conventional army it is ready to use.

This agreement is far from the unification of democracies, as Biden promised, divides the east-west of the EU, and Poland and neighbors such as the Baltic states are very concerned about the consequences. Most importantly, the failure to engage in the Russian annexation of Crimea and attacks on the sovereignty of Ukraine set a dangerous precedent that will be set in Beijing, which has its own territorial pretensions to neighbors. Responding to the Chinese threat means responding properly to the Russian threat – not trying to wish it away.

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