All parties in the Ukrainian crisis should do their utmost to avoid any further escalation, writes Friedbert Pflüger, Director of the European Centre for Energy and Resource Security (EUCERS) at King’s College, London, and Deputy Minister in the first Merkel government. According to Pflüger, Europe must recognize that Russia has legitimate interests in Ukraine, while the Russians have to recognize Ukraine’s right to self-determination. If Ukraine is torn apart, there will be only losers. Pflüger also notes that “a protracted Ukraine conflict would make it more difficult for Russia to realize its South Stream project”.
The Ukrainian crisis has a number of serious consequences, particularly for EU energy supply security. Currently, Europe has few immediate gas diversification options and heavily relies on Russian imports, which supplied approximately 30% of its needs in 2013. Thus, any interruption to this supply would have obvious ramifications. And while there are a number of alternative gas import options looming on the horizon, such as shale gas in the form of LNG from the US and conventional gas from Azerbaijan, the Eastern Mediterranean, Iraqi Kurdistan and even Iran, most of these options will not become a reality for the EU until at least the start of the next decade. Until then, the EU’s dependence on Russian gas will almost certainly increase in light of declining indigenous gas production. Even beyond 2020, Russia will remain one of the largest foreign suppliers of natural gas to the EU.
However, the concept of energy security does not only apply to energy importers. Russia is just as heavily dependent on the EU to guarantee its security of demand. In 2013, about 70% of Russia’s total natural gas exports went to the EU. The gas exports are valued at some USD 100 million a day and constitute a substantial portion of Russia’s government revenues.
Moreover, the current situation has shrouded Moscow’s South Stream project in uncertainty. While some may argue that one of the main ramifications of the conflict is accelerating South Stream construction in order to decrease transit risk, it could be just as likely that the Ukraine crisis will postpone its completion, at the very least. This is because Moscow’s intervention in Ukraine immediately shook investor confidence and hurt its economy. The Russian bourse lost nearly USD 60 billion in market capitalization, the central bank had to spend about USD 12 billion of its reserves to prop up the ruble as it dropped to a record low and shares of Gazprom (the key driver of South Stream) fell by nearly 14%. While Russian stocks and the ruble have rebounded on hopes of easing tensions, a protracted Ukraine conflict would likely make it more difficult for Russia to finance and find additional investors for what was first and foremost considered a geopolitical instead of a commercially viable infrastructure project.
It is in the interest of the West, Russia and Ukraine to avoid any further escalation and remember the ground rules of rational foreign policy. The posing and muscle flexing from both sides is not constructive. It is also illusory to believe that particularly Ukrainian energy security can be achieved without keeping Russia’s interest at the back of one’s mind. Russia’s threat to renounce the Dollar as reserve currency or not repay loans from US banks and the West’s talk of evicting Russia from the G-8 would lead nowhere – both need each other.
Russia, of course, cannot have a veto over Ukraine’s future and has to recognize the country’s right to self-determination. Conversely, the West must understand that Russia has vital and legitimate interests in Ukraine. An alignment of Western and Russian interests is necessary in a number of countries such as Syria, Iran, Afghanistan and North Korea. In many cases, closer cooperation is desirable and possible, for instance in Central Asia.
U.S. Secretary of State John Kerry has stated that Ukraine should not be a battleground between “West versus East”, and rightly so. Ultimately, it will be in the interest of all parties to align their interests and de-militarize the conflict as soon as possible.
Ukraine will not become a full member of the EU in the foreseeable future, but also not a function of Russian politics. What is important now is to ease tensions and start discussions on a number of issues in order to rebuild broken trust and demonstrate to Ukraine that an alignment of interests between the West and Russia is possible.
Germany’s Minister of Foreign Affairs, Frank Walter Steinmeier, underlined throughout the crisis the importance of maintaining a dialogue. We need to prevent Ukraine from becoming a country that is torn apart by opposing spheres of influence. The goal must be to create a showcase for East – West cooperation. Only then can energy security for the EU, Ukraine and Russia be guaranteed.
Prof. Dr. Friedbert Pflüger is a retired Deputy Minister of the first Merkel Government. He is Director of the European Centre for Energy and Resource Security (EUCERS) at King‘s College London and Managing Partner of Pflüger International Consulting GmbH, Berlin.