Beginning January 1st Russia halted gas pipeline shipments to the Ukraine by shutting down supplies. This outage was in response to Russia’s insistence Ukraine had been siphoning off fuel for re-sale or its own usage, a claim Ukraine emphatically denies. Since the outage started 12 days ago 18 countries have been directly affected by the critical outage in the middle of a harshly cold winter. If this sounds familiar then your memory is working, it happened 3 years ago but the outages were for 1 day and the price of the oil was the issue. Now millions of people are trying to stay warm, keep working, and keep critical services in operation with massive fuel shortages while 2 countries continue an unresolved spat over fuel oil usage and sales. Russia today, January 13th, agreed to resume shipments. 12 days of an outage, during a bitter cold winter, and taking 3 days for fuel to begin to reach its destinations, more while wells start back up and refineries start to refine the oil again.
The EU, for its part, has been desperately trying to broker a deal between the two to head off a humanitarian crisis in an economically vulnerable section of Eastern Europe during the most challenging economic times of a couple of generations. Seven days into the ordeal it seemed a deal had been struck with the EU vowing to send independent monitors to the Russian, Ukrainian and exit points on the pipeline to ensure fuel flow was unimpeded and unchanged through Ukraine. Ukraine attached a measure stating Russia was the source of the blame for the outage and Ukraine was innocent of any allegations of misdirection of fuel flow. Russia balked at the attachment, talks fell apart, and the whole while Eastern Europeans shiver and try to deal without heat, electricity, or work as they deplete their strategic reserves set up from the last time this happened (of the countries affected 40% of their current supply comes from the Ukrainian pipeline, the Ukraine gets 80% of its fuel from this pipeline).
Once the agreement is reached, fuel begins to flow, and monitors are reporting back to Russia it will take 36 hours for fuel to reach the first customer on the pipeline. Russia has stated the outage has cost the supplier, a state owned oil company, $800 million US dollars and as a result they have had to shut down 100 oil wells and refinement for those wells, further increasing the time needed to get the fuel to the people afflicted. These are the facts of this Russian energy mess, part 2.
How did this happen, again? Is this really so easy as to be a dispute between business deals between 2 countries? Is Russia really so hard nosed as to allow people (many of which used to be part of their empire) in Romania, Chez Republic, Bosnia-Herzegovina, Bulgaria, Croatia, Serbia, Greece, Hungry, Macedonia, and Austria to suffer or as leverage to strengthen their position and ensure quick compliance? Is anyone really surprised over Russian aggression in military or business matters since the Georgian campaigns the past year? The last question may seem slanted, but looking at Russian interests and maneuvers over the past 3 years and it is clear to see which direction the bear is going.
This started for 2 reasons, one obvious and one only slightly more veiled. For starters Russia is suspecting Ukraine is diverting fuel for use and sales. Ukraine is dependant on Russia for 80% of its current oil needs and no meaningful strategic reserves built since the last outage 3 years ago. Ukraine has a vast knowledge and capability of refining, transporting, and selling of oil, just no oil rigs to extract the oil resources within its borders (due to laziness and lack of capital). Due to this it would not be shocking to see if it were the case, however Ukraine gets its oil from Russia at 50% of the commercial price. Ukraine has made deals with Russian state owned oil companies to extract its oil for its own refinement and use/sale. Russia depends on the pipeline to get its oil to Eastern Europe, so this action does not have a clear cut advantage to either side on the surface.
The second reason for the outage is the fact oil went from over $150 a barrel a years ago to just at $40 a barrel today. Russia is dependant on its sale of oil to keeps its still shattered economy treading water and from falling back into social chaos. Their power and influence revolves around oil sales as much as the countries in the Middle East. With prices low Russia is threatened. Threatened in the same way it is by Georgia and the Ukraine joining NATO or Poland and other former satellites having influence, money, and policy shifts away from Moscow and in-line with EU member states and NATO alliances for military protection and defense against any forceful way to re-incorporate them into a new Russia.
Ukraine is more then likely diverting some small amount of fuel, but for its own needs more then to profit or boost its economy. Ukraine is already getting a sweet price on the oil, half the market price, so why would they risk such a great deal and continued conflict with a increasingly hostile and ill tempered neighbor and former ruler? Ukraine also is wholly dependant on Russia for its oil needs, 80% come from Russia! Many of Ukraine’s future oil deals for extracting its onshore and off shore oil is with Russian state owned oil companies, rumored at dragging their feet to draw out the oil extraction process while Russia investigates an alternative pipeline by-passing Ukraine all together.
Logically speaking the real issue is with Russia’s feelings and the price of oil. Now that the price has dropped and despite OPEC’s production cuts is still dropping so Russia is losing revenue on its previously earning from $75 billion dollars in annual sales through the pipeline to more then half that as oil has fallen to that much. Russia want to renegotiate the price and in-place agreements to be more favorable to them and to ensure Ukraine is more under their thumb and less independent. Georgia and Ukraine have been gravitating more and more to the West, EU and NATO in particular. Russia does not like this as it would place its former enemy right on its direct home border, too close for comfort. Make no mistakes people, Russia is rebuilding and hungry to regain its former influence and power on the world stage. Russia is playing chess with Europe and it seems the EU and NATO are both blind to this.
When the Georgian conflict happened last year I took some heat from anti-war activists for my hawkish and militaristic views on what needed to be done. Well, here we are and now Russia fears no military or economic punishment for freezing people in Eastern and Central Europe just to get a better long term contract for a resource it provides to a region dependent on that resource. At least most of the region is aware enough to keep less then half their dependency on any one resource, but still the cut hurt and to a point the EU would meet any demand and all conditions quickly to prevent humanitarian, economic, and political cresses from breaking out in their member states for not acting quickly and decisively to resolve the issue. Russia is more then happy to play with peoples lives to better its policies and economic strategies, in a way that echoes the evil and inhuman approach the Stalinist regime of the former USSR had. Russia in its current political state is not our friend or ally or partner or anything we can treat as a willing participant in a civil and rule of law world. Until we stand up to them we will see more and more of this behavior as they rebuild and re-tool themselves into a superpower again.
Here is China the media is reporting on the stubbornness of the Ukrainians and the seriousness of the situation on a humanitarian level, despite global warming, I mean climate change, this winter is bitterly cold with those countries involved seeing 10 degree below freezing temperatures over the period of the outage. Chinese citizens see it as a foreign matter all together. This is not unique or out of the ordinary. Chinese peoples views on foreign policy is colored by the results of the Opium Wars, the Cold War, and their view of meddling in internal affairs by foreign powers who have no jurisdiction to voice an opinion (Taiwan and Tibetan independence, human rights, resource acquisition, arms and strategic alliances, etc.). To the average Chinese I have spoken to this matter is not of their concern, and if it were they would not tip their hands to which way they were leaning because they don’t want to be seen as sticking their noses where it does not belong, something they blame the US and Europe of doing to them for the past 100 years.
China has a unique isolationist view on all international affairs that do not directly impact its territories. Palestine, Iraq, Afghanistan, Cuba, North Korea, Myanmar, Duffar, Somalia, and others, Chinese do not particularly care what is going on there and their government’s stance is not a major concern as it does not impact their lives. The government here may issue statements and opinions, but for the most part they approach these issues only if forced to or dragged in by other strategic or economic partners. China did not do anything for the pirate issue until its government owned shipping industry got tired of paying ransoms. China kept selling arms to Duffar despite proof of what was going on there. China will not lean on another country or condemn their actions unless they directly impact them, bag dumping in the EU, currency manipulation in the World Bank, aggression close to their borders or actions that are perceived as splitting its territory. To them Russia is a strategic and economic partner, but their deals not impacting them are not of their concern. If China wants the power and influence of being a world leader, as they keep implying they do, they will have to take the responsibility by doing things like voicing their opinions on such matters.