Russia Is Crushing Ukraine's Hopes for Energy Independence

Eastern Ukraine is home to nine-tenths of the country's coal and one of Europe's largest shale-gas deposits. Will the region soon be Moscow's?
A solar power station on the outskirts of Simferopol, Crimea. (Vasily Fedosenko/Reuters)

Russian intervention in eastern Ukraine has never looked more likely.

In events that eerily resemble the prelude to Russia's annexation of Crimea,  pro-Russian demonstrators have overtaken government buildings in the eastern Ukrainian cities of Kharkiv, Luhansk, and Donetsk, proclaiming a "people's republic" in Donetsk and snagging weapons and possibly hostages in Luhansk (Ukrainian police have regained control in Kharkiv). Oleksandr Turchynov, Ukraine's acting president, has blamed Moscow-organized instigators for the unrest, as fears mount in the West that Russia, whose troops are massed along Ukraine's eastern border, could seize Ukraine's industrial heartland next.

If that happens, Russian President Vladimir Putin would acquire various forms of leverage over the young, weak, and pro-Western Ukrainian government—including an often-overlooked one: Ukraine would have little hope of achieving energy independence from Russia.

Energy politics and Ukrainian politics are often the same thing. Around 40 percent of the energy Ukraine consumes comes from natural gas, according to the U.S. Energy Information Administration. Three-fifths of the 50 billion cubic meters of natural gas Ukraine uses each year is imported from Russia, with the rest domestically produced. This gives Russia a significant bargaining chip in its relations with Kiev—one that Moscow isn't afraid to use. Gazprom, a Russian energy conglomerate with close ties to the Kremlin, raised gas prices for Ukraine by 81 percent earlier this month, prompting Ukraine's interim prime minister, Arseniy Yatsenyuk, to accuse Russia of "economic aggression."

Even ousted Ukrainian President Viktor Yanukovych's pre-revolution government sought greater energy independence from Russia after bitter price disputes with Moscow and two gas-supply shutdowns in 2006 and 2009. A 2011 OECD analysis identified three major objectives for Ukraine's energy strategy: doubling electricity production between 2005 and 2030, shifting thermal power plants from gas-fired units to ones fueled by domestically produced coal, and increasing nuclear-power generation. Last August, Kiev approved a new energy strategy through 2030 to reduce its dependence on foreign-energy sources through investment in renewable-energy sources and greater utilization of domestic energy reserves.

Unfortunately for Ukraine, the Crimean peninsula was crucial to the country's energy-diversification plans. Yanukovych had opened negotiations with Azerbaijan, Russia's last remaining ex-Soviet energy rival, as part of his effort to build a liquid-natural-gas pipeline terminal on Crimea's Black Sea coast. The peninsula also sits atop vast underwater gas basins in the Black Sea, estimated to contain between 4 and 13 trillion cubic meters of natural gas. As Ukraine's southernmost territory, the peninsula has the highest solar-energy potential in the country and already featured one of Europe's largest photovoltaic parks. Its mountainous coastline holds strong wind-energy potential, with seven wind plants already built there and more planned before the crisis. But all of that infrastructure and investment now rests in Russian hands.

A Ukrainian operator controls pipes at the main gas pipeline in the village of Boyarka, near the capital Kiev. (Ivan Chernichkin/Reuters)

The loss of Crimea only further weakened Ukraine's already-tenuous energy security. Almost all of the fuel for Ukraine's 15 state-owned nuclear reactors, which accounts for almost half of the electricity the country generates, comes from Russia. Ukraine's domestic reserves of uranium are paltry, and it lacks the enrichment capacity to turn what it does have into usable fuel. Russia, by comparison, is a net uranium exporter to Europe and owns nearly half of the world's enrichment capacity.

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Matt Ford is an associate editor at The Atlantic, where he oversees the National Channel and works on social media.

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