Time for the Washington-Warsaw-Kiev energy axis

Jagiellonian Club
Nov 29, 2019 · 8 min read
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Ukraine has realised that its current policy of cooperation with Europe for energy security is ineffective. Kiev’s change of direction in this field is a chance for Poland supported by the United States.

by Jakub Wiech

There is much to suggest that Ukraine’s existing policy of ensuring its energy security within the framework of a partnership with the West has been considered ineffective by the authorities in Kiev. The change of forces within the Ukrainian state and the emergence of the fraction of the current president, Volodímir Zelenski, has certainly played an important role here. However, it cannot be ignored that Ukraine’s former key ally in this field, Germany, has simply failed to fulfil its declarations.

Having found itself in a disastrous situation in 2014, Ukraine needed a strong partner to support it in its foreign policy, especially in its relations with Russia. Germany, the strongest country in the European Union, has been chosen to fulfil this role.

For Kiev, finding aid in the external sphere would translate into more efficient fight against Moscow’s influence in the internal sphere, especially within the economic one. The struggle to put in order the key pillar of the state is clearly visible within the question of energy supply, where Ukraine has had some success.

Undoubtedly, the greatest achievement of the Ukrainian energy sector after 2014 was the reduction of direct imports of Russian gas to zero, although only three years earlier Gazprom covered about 70% of Ukraine’s demand for this raw material. Amongst other things, this was due to the intensive expansion of its own production capacity, which Kiev plans to increase until it achieves full independence. Along with changes in the supply portfolio, there have also been reforms of the gas market in order to bring it into line with the EU level. The result of these actions was an attack on Dmytro Firtash, an oligarch who manages most of Ukraine’s gas distribution networks through his Regional Gas Company. The protection of critical energy infrastructure has also been strengthened within the framework of improving internal security. Less successful were the attempts within the power industry, but there are also actions taken to convert it to the western direction — here we can indicate the process of synchronization of the Ukrainian power system with the European one, for example.

Meanwhile, Berlin, on which the then Ukrainian president Petro Poroshenko based his foreign play, took the role of the leader of the Old Continent in the difficult talks between Kiev and Moscow, which began after the demonstrations in Maidan, the annexation of Crimea and the war in eastern Ukraine. It was Germany that made every effort to ensure that the debate on this exemplary situation for Europe was held in the most exclusive group possible. In this way, the so-called Normandy Four was created, which included the aforementioned three states and France, acting as the wingman for the German state.

One of Germany’s key commitments to Ukraine was the Nord Stream 2 pipeline. This Baltic Sea route, which is a twin operation to the Nord Stream gas pipeline already in operation, may enable Russia to redesign its gas transport route to Europe. The current transit route runs through Ukrainian territory, allowing Kiev to earn about USD 3 billion a year from fees (which constitutes about 3% of its GDP). Once the Nord Stream 2 pipeline is operational, Gazprom will be able to bypass Ukraine and reroute gas transit through the northern route, which will mean a loss of significant revenue for Ukrainians. However, the financial aspect is not necessarily the most important — Kiev fears that the loss of transit country status will open the way for Russians and their paramilitary allies to further aggression.

Via its most important leaders, Germany has repeatedly assured that the transit of Russian gas through Ukraine will be maintained. However, Germany has no interest in doing so. Berlin will benefit most from the launch of the Baltic Sea route — German companies are involved in this project and Germany itself will become the central European gas hub through the Nord Stream pipelines, which will act as an intermediary in the trade of Russian gas on the continent. Such a model will provide Germany with significant political and economic gains — the author of these words described in more detail Berlin’s plans in this respect in his book Energiewende. A new German empire.

It was clear from the very beginning that Germany did not intend to prevent the construction of Nord Stream 2 — it was not for this reason that it had put up such a protective shield over the project (which could, after all, withstand, among other things, the conflict in Ukraine, the shooting down of a passenger aircraft MH17 or the attempted murder of Skripal) to later abandon this initiative. A strong point of Berlin’s involvement in this project was the game around the amendment of the gas directive, which was to crack the whip over Nord Stream 2, and which was deprived by the German-Austrian-French trio of important instruments to influence this gas pipeline.

A good summary of Berlin’s actions to protect Ukraine against threats related to Nord Stream 2 will be that even the small Denmark has done more for Kiev in this area. Copenhagen has delayed the project by withholding (despite enormous pressure) decisions to lay the pipeline in its territorial waters and in the exclusive economic zone. Thanks to this, Russia will be forced to negotiate a new transmission agreement with Ukraine (the current one expires at the end of 2019).

Looking upon these events, the transformation of the vector of Ukrainian politics has become quite necessary. In this way, Ukraine automatically found itself on the way to entering the sphere of influence of those countries which were openly opposed to the joint energy plans of Germany and Russia. Therefore, after the change of government in Kiev, Ukraine’s relations with Poland and the USA gained new momentum.

These two countries are almost natural allies of the Ukrainians in their struggle with the Russians in the energy field. Both Poland and the United States are committed to building a non-Russian gas market in Europe. It is precisely for this purpose that Warsaw is developing infrastructure for receiving blue fuel from directions other than the East. These are mainly the existing LNG terminal in Świnoujście, the planned Baltic Pipe gas pipeline and plans to build a floating FSRU vessel in the Gulf of Gdańsk. Thanks to these investments, Poland should have a certain volume of gas to sell abroad. Ukraine, which has not been buying blue fuel directly from Russia for four years (as mentioned above), may benefit from that. It should be noted that although Kiev clearly indicates that the current solution of gas purchases in the West is treated as indirect, imports of this raw material to Ukraine will continue to oscillate at a noticeable level over the next decade.

The development of the Polish gas trade is in the interest of the United States, which is becoming Warsaw’s leading partner in the supply of liquefied gas. Thanks to the agreements signed by PGNiG with American companies after 2023, Poland will receive about 5 billion m3 of LNG from the United States every year. By 2025, it will be 9 billion m3. It is worth mentioning that this raw material is price competitive in relation to the gas sold in this part of Europe by Gazprom.

Ukraine has already taken the first step towards closer relations with Poland and the USA in the gas sector — at the end of August in Warsaw an agreement was signed between Warsaw, Washington and Kiev on strengthening regional security of natural gas supplies. This document is to be the basis for synchronised cooperation between these countries on the development of transmission infrastructure and gas storage facilities. Moreover, thanks to the cooperation with the American-Japanese company Westinghouse, Ukraine has reduced its dependence on nuclear fuel imported from Russia. The same entity also guaranteed assistance to Kiev in the event of Moscow’s interruption of supplies of this fuel to Ukrainian nuclear power plants.

The most important Polish experts in the field of foreign affairs are already talking about a potentially beneficial turn in Ukrainian policy for Poland. As mentioned in an interview for Energetyka24 by Przemysław Żurawski vel Grajewski, coordinator of the Security, Defence and Foreign Policy section of the National Development Council in the Chancellery of the President of the Republic of Poland, „Poland, demonstrating the scale of its very deep rapprochement with the USA, is becoming an indispensable partner for the direction of Ukrainian Euro-Atlantic policy”.

„In order to be able to show credibly to Ukrainian public opinion the success in foreign policy, it is in the interest of the Ukrainian state and government to change its priority to Euro-Atlantic cooperation, which has just happened in Warsaw,” said Żurawski vel Grajewski.

However, the last few weeks have brought a political warning about the involvement of the United States. This is, of course, the case with the US President’s interview with the President of Ukraine, during which the host of the White House was supposed to put pressure on Volodímir Zelenski to investigate the case of Hunter Biden, son of Trump’s potential presidential countercandidate, who sat in the supervisory board of the Ukrainian gas company Burisma Holdings between 2014 and 2018. According to media reports, the President of the United States went as far as blackmail, threatening to suspend aid to Ukraine.

This matter does not, of course, jeopardise the potential of American-Ukrainian relations. Who knows, maybe Donald Trump, wishing to rebuild his own image and that of Volodímir Zelenski, will make some kind of a meaningful gesture in line with the interests of Kiev? However, its repercussions on the impeachment of the US President clearly show that long-term cooperation with the United States requires both the support of Republicans and Democrats.

Regardless of the future of this matter, Poland should strive for the broadest possible US involvement in Ukrainian affairs — not only because of the possibility of energy cooperation, but also (or rather: primarily) in order to shift the centre of gravity of the region’s security further eastwards. However, this process should be as comprehensive as possible, which again highlights the importance of key sectors such as energy.

The agreement signed in Warsaw and the related further Polish-American-Ukrainian talks are, of course, the beginning of a road which will require, among other things, controlled and harmonised development of the Polish ‚Northern Corridor’, i.e. the infrastructure for off-take of non-Russian gas located on the Baltic coast, as well as continued cooperation with the USA in the area of blue fuel supplies and work on increasing transmission capacity from Poland to Ukraine. Meanwhile, the first attempt at this new policy could be made in the winter of 2019/2020, all because of the impasse in talks between Kiev and Moscow on a new transit agreement.

Polish version is available here.

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Publication (excluding figures and illustrations) is available under Creative Commons Attribution 4.0 International. Any use of the work is allowed, provided that the licensing information, about rights holders and about the contest “Public Diplomacy 2019” (below) is mentioned.

Originally published at https://klubjagiellonski.pl.

Jagiellonian Club

Written by

A Polish non-partisan association with republican roots. It combines features of an educational institution, media, think tank and a citizen movement.

Klub Jagielloński: the Polish angle on politics

Politics, policy and society as viewed from the heart of Central and Eastern Europe.

Jagiellonian Club

Written by

A Polish non-partisan association with republican roots. It combines features of an educational institution, media, think tank and a citizen movement.

Klub Jagielloński: the Polish angle on politics

Politics, policy and society as viewed from the heart of Central and Eastern Europe.

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