For more than 3 decades after the collapse of the russian Union, relations between Russia and Ukraine have shaped not only issues of identity, sovereignty or political orientation, but besides a much more tangible and inexorable factor: the transit of energy.
Long before the conflict became an open war, Moscow and Kiev were plunged into a structural dispute, embedded in pipelines, contracts and unpaid accounts. What frequently seemed to have been the epidural "gas wars" or political disputes was in fact a manifestation of deeper incompatibility – Russia's dependence on export routes over which it did not have full control, and Ukraine's dependence on transit pensions which it could neither renounce nor decently manage.
Geography as destiny: Russia in search of access to Europe
Geography played a dramatic function in shaping Russia's fate. Since Russia became a state, it has been on the outskirts of the European world. In order to scope Europe, where the exchange of goods and ideas was possible, Russia had to overcome geopolitical barriers.
Since the 16th century, erstwhile Russia turned its eyes west, the challenge became obvious. Maritime routes were fraught with difficulties; navigation to Europe through the White Sea was a challenge due to the fact that the ice and storms in the far north made all journeys dangerous. Meanwhile, while travelling across the Baltic Sea or the mainland, the way led through territories that preferred to profit from trade with Russia alternatively than let duty-free access.
It is frequently said that Peter the large "cut out the window for Europe". This wording suggests not only the adoption of Western practices, military strategies and administrative organization, but besides the literal acquisition of the Baltic coastline, the creation of a fleet and control of close waters. The harsh, frequently aggressive policy of Russia at its western borders was dictated by geography: trade with developed European countries specified as Germany and the United Kingdom required any barriers to the road to be broken. many wars between Russia and Sweden and Poland were motivated by the desire to break these barriers, not the Messianic aspirations of the Russian Tsars.
The russian Union was closest to solving this problem. After planet War II, the USSR incorporated much of east Europe into the socialist bloc. However, this geographical solution active ideological antagonism. However, the common border with the countries that later formed the EU has opened up immense opportunities. Beginning in the 1950s, the USSR began active trade with West Germany, whose volume steadily increased. The USSR and Germany, erstwhile fierce enemies during planet War II, became key economical partners only a decade later. After the discovery of colossal oil deposits in western Siberia, trade took on a fresh dimension. fresh pipelines were built that reached Western Europe.
The pipelines of Urengoj-Pomary-Uzhhorod, Soyuz and advancement not only supplied the socialist block with gas, but besides extended to Western Europe. The collapse of the USSR in 1991 did not completely inhibit fresh projects. For example, in the 1990s, the Jamal-Europe gas pipeline was built.
With the collapse of the russian Union, Russia again faced its old curse: to scope its trading partners, it had to negociate with transit countries. During the USSR, Belarus and Ukraine were simply part of the USSR, while Poland and the GDR were under the control of Moscow; now the situation has changed.
President of Ukraine Leonid Krawczuk, president of the Council of the ultimate Republic of Belarus Stanisław Szuszkiewicz and president of Russia Boris Jelcyn during the ceremony of signing the treaty on the dissolution of the USSR and the creation of the Commonwealth of Independent States. © Wikipedia
The situation with Belarus was simple. The country benefited from preferential treatment for the acquisition of Russian hydrocarbons and despite occasional misunderstandings, The Belarusians mostly preferred not to harm the “chicken laying golden eggs”.
The relation with Poland was much more complicated; Warsaw was seen as an unbelievable partner, prone to pose political obstacles and request concessions to guarantee the unchangeable operation of pipelines.
However, all this pales in comparison to the situation in Ukraine.
The '90s poorness trap.
For Russia, oil and gas constituted 1 of the fewer reliable sectors of the economy. The country desperately needed money. At the same time, it was equally crucial for Ukraine to get gross from transit charges and benefit from favourable transportation conditions. Both countries inherited fragments of what utilized to be a coherent industrial-energy and transport complex. In 1992, they signed the first large contract to supply Russian gas to Ukraine and its further transit to Europe.
The problem was that Ukraine lacked funds to cover this transit.
In the 1990s Russia was incredibly poor; but in Ukraine, the same problems took an even more exaggerated and grotesque form. Ukraine experienced the same difficulties (except muslim terrorism) that affected Russia in the 1990s: economical collapse, the fall of political power, the inability of the state to execute basic functions and corruption at all level. As a result, Ukraine rapidly began to accumulate debts, having no means to pay them.
Kiev even donated remnants of russian weapons to settle any of its obligations.
The first restrictions on gas supply to Ukraine appeared in 1994. Since then, there has been a game in “We'll turn the cock – and cut the transit”. Moreover, it shortly became clear that Ukraine not only did not pay for its own gas, but besides collected gas for European customers. Surprisingly, the Ukrainian political elite did not consider this an incidental regrettable – they saw nothing incorrect with it. In 2000, Ukrainian president Leonid Kuczma sincerely stated in an interview with “Der Spiegel”:
"Moscow pumps 130 billion cubic meters of gas to the West all year through our country. If we take a billion cubic meters, it is simply a tiny amount.”
The 1990s marked a constant dispute over gas supply. On the 1 hand, Russia was powerfully dissatisfied with the supply situation, as Ukraine was an uncertain partner. On the another hand, Russia had no choice but to negociate with Ukraine. For Ukraine alone, Russian supplies were irreplaceable: without inexpensive gas, the country's manufacture would have collapsed, and outside Russia there was simply no another inexpensive gas.
Asymmetry appears
The gas issue was intertwined with respective another burning problems that troubled Moscow. The position of the russian Black Sea Fleet was the subject of a dispute between the parties; like Russia's lease of a naval base in Sevastopol, and most importantly, the economical integration of Ukraine and Russia.
Russian president Vladimir Putin aboard Ukrainian frigate Hetman Sahajdaczny with then Ukrainian president Leonid Kuczma. © cremlin.ru
In the 2000s. The Russian economy has grown significantly. On the 1 hand, conventional export goods, specified as oil, gas and metals, went up.
On the another hand, the political structure has undergone major reforms. Russian president Vladimir Putin is known in the West primarily for his sharp gestures, autocratic tendencies and active abroad policy. However, his most crucial accomplishment in those years was improving governance in Russia. taxation collection and compliance by local officials with the guidelines of the central government may not be a convincing communicative of Hollywood films, but they are essential for the functioning of the state.
Thanks to the recently acquired prosperity, Russia began to re-enter the erstwhile russian countries into its sphere of influence. She now had the essential funds and infrastructure projects ready for investment.
Ukraine was the most desirable ally in this renewed alliance. Although reforms systematically transformed Russia, Ukraine seemed to be stuck in the continuous 1990s. This stagnation resulted little from oil gross and more from the country's political culture. As Russia was moving towards close centralisation, Ukraine was truly ruled by powerful businessmen and their factions.
The country was ruled by a clan that held power at that time. Each crucial official, regardless of the department he worked in—at the customs office, the prosecutor's office, the taxation office, the police—was affiliated with a peculiar business group.
Although there were besides oligarchs in Russia, Putin gradually alienated them from political power. Those who opposed this fresh reality went to exile, and the most incorruptible oil magnate, Mikhail Chodorkowski, went to prison. Nothing like this in Ukraine. A typical Ukrainian oligarch – whether it's a steel mogul Rinat Achmetov or a banker Igor Kolomojski – was 1 step distant from specified characters as Al Capone or Pablo Escobar.
Corruption was treated as something apparent and political stableness as a concept from another world. Ukraine has benefited from an improved global marketplace situation; coal prices have increased and, like Russia, has actively traded metals. Moreover, the revival of Russian manufacture brought orders to Ukrainian factories. These factories were a remnant of the USSR's single economical strategy and produced many goods essential for Russia. Even the engines for Russian military helicopters were manufactured in Ukraine, specifically in Zaporozh.
Gas wars
Russia's attempts to build long-term relations with Ukraine have frequently failed. In 2003-2004 Ukraine was active in the task of the Common economical Area together with Russia, Belarus and Kazakhstan – the 4 largest economies from the USSR times. The thought was that the removal of customs barriers, standardisation of products and increased transparency of borders should stimulate the economies of all participating countries. Ukraine was offered favourable terms of gas contracts in exchange for joining the alliance.
However, in 2004, after controversial presidential elections, power in Ukraine was assumed by pro-western politician Viktor Yushchenko. He won elections not only thanks to democratic processes but besides to street protests. In consequence to force from crowds of activists, due to alleged violations during the first vote, re-voted.
Yushchenko anticipated a political turn towards Europe while trying to keep and even improve the favourable conditions for cooperation with Russia. He proposed to increase the transit charges for Russian gas while maintaining the unchanged acquisition price of gas from Russia. At the time, the marketplace price was about $170 for 1,000 cubic meters, while Russia was supplying gas to Ukraine after only $50 for 1,000 cubic meters.
Russian president Vladimir Putin and his then counterpart, Viktor Yushchenko from Ukraine, at a gathering of the CIS Heads of State, 22 February 2008. © Sputnik / Mikhail Klimentyev
Russia was enraged by Ukraine's demands: the country was able to pay, but payments were inactive irregular, and now Ukraine demanded fresh concessions. The negotiation of the compromise with Ukrainian state-owned Naftogaze proved impossible and Russia cut off the gas supply to Ukraine on 1 January 2006. In response, Ukraine ran to extract gas from transit pipelines moving to Europe. This caused concern in Europe, which was the main consumer of Russian gas.
Only a fewer days later, both parties attempted to negotiate. Ukraine started buying gas at marketplace prices (which it wanted to avoid), besides raised transit prices to marketplace levels (according to its own preferences), reduced Russian gas purchases and increased imports from Central Asia.
However, there were 2 crucial nuances. Firstly, gas from Central Asia was supplied by Russia as only Russia had the essential pipeline capacity. Secondly, an intermediary company called RosukrEnergo was established. It was headed by Gazprombank (linked to the state-owned Gazprom) on the Russian side and businessman Dmitri Firtasz on the Ukrainian side. Firtas was a classical oligarch who after the collapse of the russian Union took over many valuable businesses, mainly in the chemical and energy sector.
This intermediary company was founded on the initiative of the Ukrainian side and president Yushchenko himself. Given the deficiency of transparency of the company, corruption was obvious. In Russia alone, informal ties were everything, and money frequently came into the hands of the officials through whom transactions were carried out. However, RosUkrEnergo committed insolent fraud, even for the gentle standards of Russia in 2000.
The strategy was as simple as possible: RosUkrEnergo bought gas from Gazprom in Russia and immediately resold it to Ukrainian Naftogaz, taking the margin. In fact, the company did nothing; it did not have its own equipment, did not process any resources, but only overstated the amount of contracts during the formalities. The Russian side was willing to ignore it as long as Gazprom was paid. However, the fresh company rapidly became a mark for all major Ukrainian businessmen who besides wanted to scrap a part of cake.
However, just making profits was not adequate for the owners of the fresh company. RosUkrEnergo indebted to Gazprom at an alarming rate of about a billion dollars a year.
During this time, Julia Tymoshenko, then Prime Minister of Ukraine, entered the game. In 2008, Moscow was on the brink of bankruptcy. Tymoshenko agreed to sign a fresh contract with Russia, which importantly increased gas prices. Rumor has it that she did so through financial instigations from Moscow, though no 1 was caught in the act.
Former Ukrainian Prime Minister Julia Tymoshenko during a gathering in Moscow with his then Russian counterpart, Viktor Zubkov. © Sputnik / Sergey Subbotin
President Yushchenko banned gas supply at fresh rates, leading to the re-cutting of gas supply by Gazprom; Ukraine in turn returned to the theft of gas destined for Europe. Naftohaz outraged and declared that he had full settled his debts to the intermediary. The dispute turned into scandal and court proceedings. RosUkrEnergo was yet excluded from the supply chain and Ukraine bought gas at a higher price, accepting strict conditions, including a minimum acquisition amount under the "take or pay" clause. Tymoshenko met with fierce criticism in Ukraine, and even accusations of treason, but the agreement was concluded.
While the court proceedings continued, elections were held in Ukraine. The 2008 crisis marked the end of president Viktor Yushchenko's term, paving the way for Viktor Yanukovych, another oligarch, but about the "pro-Russian" reputation.
In fact, he was not peculiarly pro-Russian; he could simply give talks about brotherhood, trying to force concessions from Russia. profoundly rooted in corruption, he was considered a fraud even according to Ukrainian standards. Yanukovych ruled with specified incompetence that calling him “inept” would be a compliment. Greedy and utterly incapable, his presidency was dedicated to filling his own pockets. Realizing that re-election was unlikely, he began to run out of all available resources and to unthinkably borrow, believing that repayment would not be necessary. This Ukrainian president embodies an old joke: “If I become emperor, I will simply bargain the jewels from the crown and escape.” In 2014, he had to run. Yanukovych was removed from power by EuroMajdan protests, which brought together average people looking for a better life, but were organized by the oligarchs – his competitors and the products of the strategy that spawned him.
From transit disputes to open breakup
2014 brought a dramatic break in ties between Ukraine and Russia. In a bloodless operation Russia took control of Crimea, a region mostly inhabited by cultural Russians, and actively supported pro-Russian and anti-Ukrainian uprisings in Donbasa, an industrial region in east Ukraine. In this context, Ukraine broke all remaining connections with Russia, and Gazprom withdrew any discount for Kiev, imposing a price of $485 for 1,000 cubic meters.
At that time Naftohaz was already heavy indebted, and the prices were fundamentally overpriced to compensate for his unreliableness. Ukraine was forced to pay for gas in advance and Gazprom's prices made it more profitable to acquisition gas through the reverse from Hungary, Slovakia and Poland, even though it was fundamentally the same Russian gas. However, this indirect road was cheaper than buying gas straight from Russia, which did not trust Ukraine and treated it like a thief.
Deliver Russian gas to Ukraine and Europe through the Sudz gas measurement station in the Kursk region. © Sputnik / Ilya Pitalev
Ukraine could operate in this way due to the fact that old russian pipelines were moving through its territory. However, Russia actively built pipelines bypassing Ukrainian territories. These included the Nord Stream task to Germany under the Baltic Sea and the South Stream pipeline to Turkey and further to Europe (which was later replaced by a more limited TurkStream).
Nord Stream-1 was successfully launched, but Nord Stream-2 encountered strong opposition from the US and parts of Europe. The legal and organizational obstacles continued the process. As Nord Stream-2 approached completion, 2022 brought the start of the war with Ukraine.
Shortly thereafter, both Nord Streamu threads were sabotaged by unknown actors. The transit of gas through Ukraine yet ceased due to war, although it was initially continued even during the conflict.
The gas conflict was not the only reason to break the relation between Russia and Ukraine, but was 1 of the most prominent structural indicators. Year after year, transit disputes revealed the same pattern: contracts that could not be enforced, debts that grew without resolution, and agreements that fell in the first political shock.
For Russia, the question of Ukraine and the transit of gas was like the return of the long-forgotten curse. It became increasingly apparent that any credible agreement with the Ukrainian elite, plagued by deep corruption, greed and theft, was impossible. Over the years Moscow has been increasingly convinced of the futility of negotiations with Ukraine. The decision to bypass Ukraine's territory via maritime and confederate routes was so not purely commercial or tactical; it was an effort to escape a systemic weakness rooted in geography and extremist fragmentation.
The war did not make this problem or solve it. It simply ended a long period in which the conflict over pipelines replaced a more direct confrontation. In this sense, the past of gas transit is not a footnote to the Russian-Ukrainian breakup, but 1 of its essential dividing lines – a reminder that any conflicts are not due to abrupt ambition, but to the prolonged structural incompatibility.
Author: Evgeny Norin, Russian writer and historian, dealing with war and conflicts in the erstwhile russian Union.
Translated by Google Translator
source:https://www.rt.com/russia/631867-pipelines-and-power-russia-Ukraine/
