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By Carlos Pascual
KIEV, Sept. 18 (Reuters) - For two days last week politicalleaders, academics and business leaders met in Kiev to focus onending Russian aggression toward Ukraine and helping Ukrainiansrevive a war-torn economy. Tony Blair, Aleksander Kwasniewski,Javier Solana, and Jose Manuel Barrosso were among theinternational leaders gathered at the 11th annual Yalta EuropeanStrategy group, this year convened at the Ukrainian capitalbecause Russia has annexed Crimea and injected Russian troopsand weapons into the conflict to spark nothing short of war.
The fighting in Ukraine has destroyed a major industrialregion, stopped the flow of coal to the power sector, and takenthousands of lives. Perhaps the recent deaths of Russiansoldiers fighting in Ukraine may give President Putin theimpetus to abide by the most recent ceasefire. For Putin theissue is a projection of Russian power. For Ukraine it is amatter of national sovereignty and the integrity of theUkrainian state. The international community is slowlyrecognizing that the viability of institutions of global andregional governance may also hang in the balance.
War and politics have debilitated the energy sector ofUkraine, one of the world's least energy efficient economies. InJune, Russia cut off all gas flows to Ukraine over a contractdispute, the third such disruption since 2006. If there is abright side in this conflict, it is in provoking massive energyreforms that will loosen the power Moscow can exert over Kiev.The war alone has contracted natural gas demand by more than 15percent. Implementation of gas pricing reforms passed in Maycould compress demand by another 5 percent. With support fromthe EU and United States, Ukraine has expanded "reverse" gaspipeline flows from central Europe which allow it to tapalternative gas supplies, most recently adding a 10 billioncubic meter (bcm) line from Slovakia.
If all capacities are put to use, Ukraine could in the nextyear make up more than half its Russian gas imports in 2013.Combined with a focused effort to build gas inventories, Ukrainecould achieve a surprising outcome: it could have enough gas toget through most of the coming winter. It still could useRussian supplies, but this buffer creates more time for the EUto help Russia and Ukraine broker a deal where all sides win:Russia gets paid, Ukraine gets gas, and Europe gets stability.
But longer term, reducing Ukrainian and European reliance onRussian natural gas must remain a top priority if the region isto limit Moscow's ability to constrict and increase gas suppliesto further its political goals. Germany, Poland, Austria andRomania got another reminder of this on September 11 when Russiareduced gas flows under existing contracts, oddly at a time whengas prices are low and alternative supplies are abundant. Wasthis a clumsy attempt to suggest what further measures mightcome if Europe continues to help Ukraine with reverse flows ofnatural gas in the winter?
There could not have been a more poignant impetus for Europeto accelerate a still unfolding strategy to diversify energysupplies. While Europe depends on Russian gas for a third of itsconsumption, Russia has almost no alternative to the 220 billioncubic meters in gas export capacity it has built to Europe: amere 14 bcm to Asia, and the promise of another 38 bcm in tenyears through a recent supply agreement with China. If Europe isto diversify, it should do it now as Russia uses the next decadeto respond to growing Asian energy demand. As part of its workon the issue, Columbia University's Center on Global EnergyPolicy will release a study next week that examines how USexports of liquefied natural gas, along with European investmentand policy action, can weaken the impact of Russia's energyweapon.
The international community is awakening every day to theconsequences of Russia's war in eastern Ukraine. Russia's vetoin the UN Security Council has made it a feckless tool in thiscrisis. Russia's unwillingness to join consensus on manymeaningful measures at the Organization on Security andCooperation in Europe has blocked steps to put neutral observerson the ground to defuse the conflict. Russia's games with gassupplies will now heighten international concerns. These factorsare the wider backdrop to the tougher sanctions that the UnitedStates and Europe announced this past week against Russia: theissues have surpassed just a conflict in eastern Ukraine.
Ukrainians are seeking international help. They face adaunting task of fixing an economy and political system wrackedby corruption and mismanagement during Viktor Yanukovich'spresidency. The Ukrainian people are now trying to find themeans to rectify their problems - on their terms. Pursuingfurther energy reforms that can rebalance the relationshipbetween Russia and Ukraine is an essential first step.
(Ambassador Carlos Pascual is a Fellow and Senior ResearchScholar at Columbia University's Center on Global Energy Policy.He previously served as U.S. Ambassador in Mexico (2009-2011)and Ukraine (2000-2003). As Special Envoy and Coordinator forInternational Energy Affairs, Pascual established and directed(2011-2014) the State Department's Energy Resources Bureau andwas the senior advisor to the Secretary of State on globalenergy diplomacy.) (Editing by Andrew Hay)
