Q Club

Energy aspects of the Kremlin’s gamble in Crimea

Since Soviet times Crimea is already 60 years a part of Ukraine. Russia, where Crimean region was an administrative part, failed to develop it economically in the period after World War II. Therefore, the decision, taken in Moscow in 1954 on the transfer of Crimea to Ukraine, was motivated by economic considerations. Moscow understood that development of Crimea is impossible without Ukraine, connected with mainland by infrastructure and energy routes. Coal, petroleum products, electricity and partly gas flows to Crimea from the mainland. Over time, the water came from Dnieper to Crimea through specially constructed North-Crimean channel. 85% of water resources come to Crimea from Ukraine. Agriculture in arid northern and central parts of the Crimea is unthinkable without the Dnieper water. 82% of electricity is supplied to the peninsula from the United Energy System of Ukraine.

Peninsula and the neighboring shelf zone of the Black Sea contain hydrocarbons. Ukraine has been already producing offshore 1.6 bcm of gas, accounting for nearly 8% of the total gas production. Large-scale projects of gas exploration and production are on turn with the participation of American and European investors. The success of such projects means elimination of Gazprom’s monopoly, the appearance of additional gas flows, competitive to Russian piped gas.
In this context, separation of Crimea with its subsequent annexation offers Russia solutions to a number of strategic issues within «PaxPutiniana»:

— «Ukraine without Crimea» will loose the biggest part of its exclusive economic zone in the Black Sea, where a number of projects on gas exploration and production were initiated with the participation of leading international companies — ExxonMobile, Shell, OMV, ENI, EDF (see Figure 1);
— Deprivation of access for Ukraine to the main part of already developed offshore gas fields and promising hydrocarbon reserves in the Black Sea;
— Forcing out leading American and European oil companies from the northern sector of the Black Sea with disorganization of promising projects on gas exploration and production;
— Rerouting of the South Stream pipeline with partial laying over the Crimean peninsula and the shelf (shallow) zone of the Black Sea (see Figure 2).

Thus, given the economic dependence of Crimea, its reliance on Ukraine and Russia's intention to oppose the development of hydrocarbon resources in Ukrainian Black Sea shelf, the Kremlin is trying to develop its expansion in the south-east of Ukraine in order to annex the coastal territory and deprive access of Ukraine to the Black Sea.

See article on Slovak source «Energia»