RE: Atlantic Council article - "Time for Ukraine to exit Russias energy empire"29 Mar 2020 10:32
Pt.2
Since achieving sovereignty in 1991, Ukraine’s dependence on Russian oil and gas imports has weighed heavily on the country’s economy and political life. Russia has skillfully leveraged Ukraine’s energy dependency to influence or control the country’s political and economic development through a combination of pricing policies, corruption, cut-offs, and threats. Despite these obviously unfriendly policies, some of Ukraine’s political leaders remain eager to maintain the dependent relationship. This was made clear on the eve of Ukraine’s last parliamentary elections in summer 2019, when pro-Russian Ukrainian politicians Viktor Medvedchuk and Yuriy Boyko met with the then Russian prime minister Dmitry Medvedev. During their discussions on the need to rebuild close ties between the two countries, the prospect of lower natural gas prices for Ukraine was a central theme.
Since 2014, when Russia seized Crimea and instigated an ongoing war in eastern Ukraine, such propositions have become politically toxic, not least because export revenues from energy sales are critical to subsidizing Russian aggression. Over the past two decades, income earned from energy exports has consistently constituted over one-third and up to half of the Russian state budget. The price of oil is decisive for the Kremlin, as weak fossil fuel prices limit Russia’s ability to pursue an expansionist foreign policy, including its relentless pressure on Ukraine.
In order to continue this foreign policy, Russia must maintain its position as a world leader in fossil fuel export while keeping prices high and increasing market share abroad. This places Russia’s economic interests in direct conflict with most of the world’s governments, which have recognized the need to reduce fossil fuel consumption and move towards more renewable sources of energy in order to address climate change. It is now recognized that this must be done to maintain the long-term stability and well-being of the planet. Clearly, Ukraine’s interests and strategic goals align it with the majority of the world’s nations.
Ukraine has already taken steps to lessen its dependence on Russian energy imports. In 2015, it stopped importing natural gas directly from Russia. Meanwhile, the availability of US liquified natural gas exports to Europe, which became possible following the fracking revolution, has offered an alternative to Russian gas. In the second half of 2019, in response to Russian restrictions on oil sales to Ukraine, some imports have been coming from US sources. Russia and Ukraine signed a new five-year gas transit agreement in late 2019, but diversification should remain a priority.
Sign In
Follow the stocks
