Q Club

Gas Subtexts of Crimea Crisis

It was noted in analysis «Bloody Stream to Europe» as of 24 January 2014 that the destabilization in Ukraine has not only internal reasons, but also external stimulation, as well as a serious «gas motive» of Russian foreign energy policy. The «war in Kyiv» should help advance the Kremlin’s «South Stream» in Brussels. At the background of increasing destabilization in Ukraine, the Russian plan foresees that the EU had to meet Russia's move in the question of excluding South Stream project from the Third Energy Package. However, this did not happen, though, a definite movement of European Commission towards «Gazprom» is observed. Now at the background of outlined gradual evolution towards stabilization in Kyiv and in Ukraine as a whole, it becomes important for Russia to launch additional scenario of destabilization in order to continue arguing with Brussels the need to support the «South Stream» and the early adoption of the relevant decision to exclude it from the Third Energy Package.

This trend is enhanced by the fact that for 100 «hot days» in Ukraine there have been no incidents with the transit interruption of oil and gas supply from Russia to Europe. The piping system worked and works normally. But despite this, the thesis of the transit unreliability of Ukraine is not only continuing, but there are some attempts to saturate it with additional arguments. Some estimates by pro-Gazprom think tanks in Moscow are quite frank (for instance “South Stream is proved”, ):
— Ukraine today is not a safe state. And thank God that this time transit interruption did not occur. But what will happen next?
— Plunging into chaos Ukraine is a colossal transit risk.
— Pipe turns into the main instrument of pressure on Russia under the slogan «if you do not give us discounts transit will stop”

Summary of the publication is rather demonstrative: «Now… there is no longer questions about the indispensability of „South Stream“. The necessity also exists in „Yamal-Europe 2“ pipe through Belarus with corrected route: it should go to the south of Poland, because there is a „hole“ on the axis: south of Poland — Slovakia — Austrian hub Baumgarten. Thus, we will fully close Ukrainian theme as for volumes and routes»

Now Russia deploys additional destabilization scenario in Crimea. This is done not only because of the existence of «phantom pain» for «lost Crimea», but based upon some problems of the «South Stream» project realization. As we have already noted, the cost of the implementation of all its modules is enormous: € 56 billion, of which € 16,5 is the cost of sea and land (in Europe) segments. The question is about the optimizing of investments. Unlikely it comes to reducing the cost. Most likely it is about the redistribution of costs between foreign and Russian sections of the route, certainly in the benefit of Russian modules of the «Southern Corridor». M. Korchemkin from the Center of East European Gas Analysis consider the Crimean scenario as a variant of the sea route optimization of «South Stream», which is due to the exclusive economic zone of Ukraine extended far to the south gives the maximum length to the offshore section.

Analyzing the optimization options, one should pay attention to the Crimean route, which can make the «South Stream» combined. From the sea project exclusively, it can be transformed via sea — land (Crimea) -sea modification:

It's worth remembering, that a former President of Ukraine Viktor Yanukovych suggested «the Crimean option» of «South Stream» to Russia at the «Yalta European Strategy» VIII Conference as of September 17, 2011:

“This project is a lot cheaper than proposed one, the cost of which is now estimated to about $ 25 billion. And the route that we offer now will cost 5 times cheaper. ”

Then «Gazprom» considered this proposal impractical. Deputy Chairman of the Board of «Gazprom» Valery Golubev said that it could be done through the Crimea, Evpatoria and further — in the Black Sea, but what is the point when you can break it just directly. Probably now «a direct thinking» of Kremlin has changed to «indirect» one, under the influence of geopolitical and kleptocratic problems in time when the economy takes a back seat.

Of course, there are other options for optimization, but they require changes in the starting position of the project — the Russkaya Compressor Station on the Black Sea coast. On December 6, 2013 there has already begun installation of equipment. This CS is also the final destination of the pipeline system «Southern Corridor» from Yamal to the Black Sea.

In the autumn 2014 it was scheduled to begin construction of the offshore section of the pipeline. And it will be held in the most deep water bottom zone of the Black Sea, where depths are 1900—2200 meters. At the same time, the combined route in case of annexation of the Crimea will be held on the shelf, and not on the bottom zone of the sea with the smaller depths:

Last year in November Gazprom began to speak about the probability of making some adjustments to the project. But whether there will be such a large-scale adjustment is hard to say. Perhaps an indicator will be the change of the capacity of the Russkaya CS. Now it pompously is claimed as the most powerful in the world, with an installed capacity of 448 MW. For the «Crimean route» this capacity is redundant because both depths and distances are substantially smaller. In addition, in Crimea two compressor stations could be installed providing further gas pumping through the territory of the peninsula, and through the sea.

Crimea separation with its further annexation gives to Russia the solution of the number of strategic issues in the framework of the «Pax Putiniana»:
— gas connection of Crimea, which is almost dependent on Ukraine in infrastructure and resources now, to Russia;
— neutralization or taking under the Russian control the perspective projects of gas exploration and extraction in the Black Sea, which were initiated by Ukraine with the engagement of leading European and American companies;
— deprivation Ukraine of the access to the major part of the explored offshore gas deposits and prospective hydrocarbon resources in the Black Sea;
— forcing the leading American and European oil and gas companies out of the Northern segment of the Black Sea;
— deprivation “Ukraine without Crimea” of the main space of the exclusive economic zone in the Black Sea.

Also the question of “Crimea in exchange to gas” could be raised. A year ago the pro–Russian forces in Crimea actively used this thesis after proclamation of 7 billion claim of Gazprom to Naftogaz. It is clear that such a thesis was not a home stock of the separatists from the Sevastopol–Crimea–Russia front. It was the execution of directives from Moscow. Now after Yanukovich’s failure the Kremlin modifies Anschluss scenario for Ukraine and prepares Crimea background for the bidding with new authority in Kyiv. With “Lady Yu” return to the political life of Ukraine, Russia can start the game like the one that ended by the discriminatory gas contracts of January 19, 2009 for Ukraine and by Kharkov agreement of April 21, 2010 for Yanukovich with the Black Sea Fleet of Russian Federation prolongation in Sevastopol till 2042. One can only hope that Maidan and NSDC will not allow stepping on the same rake of 2009 (Moscow gas contracts) and 2010 (Kharkov agreement) to past politicians and their protected authority personages. Any gas agreement with Russia should not be signed without NSDC approval, the structure of which should also be reformatted quickly.

Centre for global studies «Strategy XXI»