How will Nord Stream 2 affect Ukraine?

How will Nord Stream 2 affect Ukraine?

The Ukraine revolution moreover known as the Euromaidan Revolution or Revolution of Dignity started at the beginning of 2014. The people wanted a change and to overthrow the corrupt government of pro-Russian President Victor Yanukovych. Social unrest started in all regions, but mainly in western Ukraine. Several days later, after the revolution succeeded, Yanukovych withdrew and flew to Russia.

Fearing that Moscow is losing influence in Ukraine, it may lose its strategic naval base in Sevastopol, and Ukraine can join NATO, Russia had intervened in Ukraine. First, with a swift and quick operation, Russia occupied and later annexed the Crimea peninsula to secure its naval base presence.

Seeing that the East part of Ukraine is worried by the loss of their president (Yanukovych was elected with enormous support from the eastern part), Russia supported the insurgency there. The new government failed to negotiate with rebels in the east and sent the army… and war in Donbas has begun.

Ukraine people were hoping for a better future, their country will join the EU and eventually NATO, their income will increase and it will put the end of the corruption. Six years later, almost nothing changed.

They have a pro-western government, but most of the problems are remaining. Crimea is lost, and there is no clear sign that the peninsula will return soon back to Ukraine. The conflict in Donbas continues even that there is no active fighting. The diplomatic agreement of Minsk 2 won’t soon be implemented which will end the war in Donbas, because for many Ukrainians this means to recognize their defeat in the conflict. There is no clear sign that Ukraine will enter soon EU or NATO (both organizations are afraid to challenge Moscow because they don’t want a hot war with Russia).

After so many human and economic losses because of loss of the Crimea and war in Donbas, Ukraine is taking a new hit. Russia is building several pipelines to bypass Ukraine, Nord Stream 2, which will connect Russia and Germany through the Baltic Sea and Turkish Stream through Turkey and East Europe.

Because of its weak economy, gas transit is vital for Ukraine. Without it, it will have a financial problem. But the problems are not only about money. Now, most of the Russian gas for Europe is transited through Ukraine. If this stops, Russia may be interested in a new uprising of the rebels in Eastern Ukraine, which will cause new troubles for the government in Kyiv, which will turn the country in chaos. So, let’s see what damage will cause Nord stream 2 to Ukraine?

-Lost status of a gas transit country

After the Revolution, Ukraine is still recovering. Despite recent years of economic growth, Ukraine still has one of the lowest GDP per Capita and still needs time to reach the size of the economy before the revolution. The war with the pro-rebels in the east costed a high price for the government in Kyiv — the loss of Crimea and half of Donbas (the other half is occupied back by the government), killed over thirteen thousand men and millions fled from the war. Having not enough money to put reform that the new government wants and the burden of heavy debt, that the government in Kyiv must pay, Ukraine is fighting for every penny that it can get. If Russia bypasses the country with Nord stream 2, it will be a hard hit to the economy of the country. With the launch of the Turkish stream at the beginning of 2020, Ukraine had already been hit when the gas transit decreased. Nord Stream 2 would be the final nail in the coffin, in the ambitions of the country, to be a major transit country.

Because of the current gas-transit, Ukraine receives annually around $3 billion, which is around 3% of its GDP or around 8% of its budget, which is $43 billion[1] for 2020. Despite a larger budget than the previous year, Ukraine is again in a financial deficit (spend more than the economy produces) with $3.5 billion. If Russia completely surrounded Ukraine, loss of $3 billion will be too much for the government in Kyiv and it will ensure, that Kyiv will have a financial deficit in the recent years too, something that new government can’t do because the current debt to GDP ratio is high enough and new deficits can bankrupt Ukraine.

With the current agreement with Gazprom at the end of 2019, Ukraine ensured a new deal for 5 years.

Not the ideal option, because Kyiv wanted longer contract for at least 10 years. But being pressured from both EU and Russia, Ukraine agreed to sign the contract and as compensation received $3 billion compensation according to the ruling of the Stockholm arbitration court[2], which Russia honored.

But nobody in Kyiv is happy, all they know, that this is a temporary solution. Despite the difficulties, Russia will build Nord Stream 2 and this will reflect over Ukraine. The best hope for Kyiv is that Europe will need more gas and despite the build of Nord Stream 1, Nord Stream 2 and Turkish stream, they will be not enough to transport all needed gas for Europe and Kyiv will continue to take its share of its revenue.

-Insurgency

Nord Stream 2 is dangerous for Ukraine, not only because it will stop the gas revenue from the transportation of the gas to Europe, but with the fact, that when the pipeline is finished, Russia will be completely able to bypass Ukraine gas transit system and the revenue of Russia will be not in danger.

Therefore, Russia can now play harsher in Ukraine, losing almost nothing. Its gas supply chains are secure, the sanctions of the EU and the USA are not so effective anymore, as Russia had learned a way to transform its economy and one of the results is the booming of the agriculture sector in Russia.

One of the reasons, not to fully support the pro-Russian rebels was that its gas transit through Ukraine was in danger. Kyiv government could easily stop the transition of gas to Europe, causing a high financial loss to Russia. Now, this option won’t exist with the presence of Nord stream 2.

If Russia supports the pro-Russian rebels to go in offense and completely occupy Donbas, this will cause a new problem for Kyiv, which population is having been already tired of the conflict and want a political agreement.

If rebels up-risen again, their goals could be more ambitious than the previous time. Among Russian nationalists, after the collapse of the USSR and the separation of Ukraine, the idea of Novorossiya (New Russia) was again alive.

It will include all Southern part of Ukraine, which historically was part of Imperial Russia.

Moscow was not so eager to support such ambitions of rebels-Russia provided them enough weapons and supplies to defend, but not enough resources to go offensive and to occupy all Donbas.

Now Kremlin can change its strategy. Six years after the occupation of Crimea, the peninsula has problems with electricity and water supply and Kyiv doesn’t have a wish to help the problem, despite the financial compensation. But if the neighbor region (Kherson) is under Russian/rebel control, it will solve the problems with water and electricity supply.

Despite the building of Crimea bridge (connects Russia and Crimea through Strait of Kerch), the lack of land connection is vital for the supply of Crimea, if the rebels receive enough weapons and support, one of the first goals is to secure the land connection with Crimea, something that Russia will be very pleased.

-Political support from Europe is decreasing

Europe is tired of Ukraine. EU hoped that Ukraine would pass the reforms swiftly and quickly, which will make Ukraine a developed country and it will destroy the corruption. Now, six years later, the situation is almost the same. A lot of political struggle, ultra-rich people(oligarchs), who run the country through their politicians and the corruption is skyrocketing. The reforms still need to be passed, and there is no hope for a radical change soon.

Now, the EU has a constant interest in Ukraine and its future, because it is dependable on the gas supplies that go through the country. When Nord Stream 2 is completed, the interest in Ukraine will decrease and there is a big chance to be left it to depend on its own.

Without the support of the EU, with its political and economic help… Ukraine is doomed.

More and more countries from the EU want to have better ties with Russia, but Ukraine conflict is one of the obstacles for better relations. If Ukraine holds the reforms and Nord Stream 2 is completed, it will make the EU completely free from Ukraine transit of gas, and it is possible to have a different policy towards Russia, even lifting the sanctions, which will make Ukraine position weaker. Ukraine will receive the support of Poland, Baltic countries and UK… but this support is not enough considering the fact that the UK soon is leaving the EU.

-Defeat for the Euromaidan movement

The Euromaidan Revolution or Revolution of Dignity was one of the biggest events in the new history from Ukraine. It was fully supported by the Western and Central parts. Most of the East was against (they wanted closer ties with Russia, not with the EU) and some part of it upraised with the help of Russia. Now, six years later, Ukraine lost too much and gained almost nothing. It lost Crimea; it lost Donbas; the economy fell significantly, and the income of the population declined too. Thousands of people died in the conflict in Donbas, and millions fled (some in western Ukraine, the EU, and Russia).

The corruption is skyrocketing again and there is no big difference between the corruption during the old president before the revolution and now. The majority are tired of the war in Donbas, and they want immediately a ceasefire and reaching a political agreement which may include autonomy for the Donbas region, something that the government in Kyiv is against, fearing that this can be the beginning of the separation of the country.

If Nord Stream 2 is completed and Ukraine loses billions from gas transit, this will be another defeat for Ukraine and can be the final blow for the Euromaidan movement and people will be ready for change including supporting people who opposed the Euromaidan movement and ties with the EU. Pro-Russian parties and movements may become stronger and more influential.

Conclusion

Nord Stream 2 can be the final blow for the new government in Ukraine. After so many defeats and failures like loss of the Crimea; loss of the Donbas; the fall of economy and income of the people; skyrocketing corruption… another big defeat as losing a significant income from gas transit can convince Ukraine people, that the Euromaidan movement is not the right path for Ukraine and look for new people and movements including parties who offered better relations and ties with Russia…something that no one would imagine in 2014 after the events in Crimea and Donbas.

If the insurgency movement increases and the Donbas war becomes again active, more people will be convinced that the end of war is the most important thing, they would be ready to pay any price including to give autonomy for Donbas… something that the government and Euromaidan are completely against, fearing that this will be the beginning of the separation of the country and their power will decrease.

Source:

[1]https://www.kyivpost.com/ukraine-politics/ukraines-proposed-2020-spending-of-46-billion-heavy-on-debt-repayment-defense.html?cn-reloaded=1 available 01/2020

[2]https://uawire.org/russia-agrees-to-pay-3-billion-compensation-to-ukraine-s-naftogaz available 01/2020