We are seeing a familiar pattern repeating itself. A dispute between Naftohaz and Gazprom leads to an interruption in Ukraine’s gas supply. Deliveries to Europe are affected. Russia is criticized for its use of “the energy weapon”. Then, everything is patched up, the gas flows again and the West loses interest in the matter until the next dispute flares up.
Lost in all of the ink being spilled by pundits and commentators right now is a more basic question: why haven’t we been focusing more on what Ukraine can be doing to help itself?
After all, Ukraine does has some 40 trillion cubic feet of natural gas reserves. There are also very promising hydrocarbon deposits offshore in the Black Sea as well. So why is Kiev still so dependent on Russia?
For one thing, the country still wastes a good deal of energy. J. Robinson West, chairman of the board of PFC Energy, has for years pointed out that all the post-Soviet states could save energy if homes and businesses would move to using thermostats to regulate the use of natural gas for heating. But movement in this direction has been quite slow. Moreover, Ukraine uses twice as much energy as Germany in terms of its overall GDP output. But the West runs into a dilemma here. Making Ukraine more energy efficient means making Ukrainian industry — the principal user of energy in the country — more competitive.
And developing Ukraine’s offshore reserves is beyond the capacity of Ukraine’s own firms. The hydrocarbon potential of the Black Sea shelf is quite promising but the Soviet Union lacked the technology to effective explore and exploit these deposits. Only Western firms can do it.
Yet, there is the puzzling inertia of the Ukrainian government in moving forward on developing the country’s own indigenous energy reserves. Continued infighting between the presidential administration and the Cabinet has stymied contracts and deals that might get the Black Sea reserves developed. Western firms aren’t going to put in the capital investment without a clear regulatory framework in place-and one that guarantees profits. An international company is not going to spend good money to develop the Black Sea only to find out that Ukraine expects to get the energy supplied to domestic consumers at prices far below world market standards.
Unfortunately for Ukraine, the current drop in oil prices is causing many firms to reassess future projects-making the Black Sea projects less attractive than they might have been a year ago when oil and gas prices were at all-time highs.
The United States and Europe can do little to force Russia to sell gas to Ukraine. They can, however, help Ukraine waste less energy and develop its own sources of energy. But this also requires a partner in Kyiv prepared to do the heavy lifting that is needed. Ukraine’s political leaders could afford to squabble and play games during the warm days of summer. But perhaps a few days of a winter chill will cause cooler heads to prevail.
Nikolas K. Gvosdev is on the faculty of the U.S. Naval War College. The views expressed are his own and do not reflect those of the Navy or the U.S. government.