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Speculation about President Vladimir Putin proliferates. Does he want to occupy Ukraine? Has he gone too far by arming and training Russian mercenaries who shot down the Malaysian Air jet with 298 passengers? Why is he thumbing his nose at global outrage and more sanctions? What will stop him?
Such questions miss the mark.
Putin has been executing the same business/geopolitical model for years aimed at guaranteeing his natural gas monopoly in Europe and keeping out rivals.
Ukraine is his latest victim because it ousted his puppet, Victor Yanukovych, and also because its huge oil and gas reserves could eventually make Ukraine a competitor for European customers.
Russia has controlled Ukraine since it declared independence in 1991, mostly through corruption. But in 2005, the populace staged the 2005 Orange Revolution and the 2013-14 Maidan uprising rose up against and finally expelled Yanukovych. But their victory became defeat because Putin changed tactics by shifting from managing a Ukrainian kleptocracy to engineering a fake insurrection in parts of the country to turn its resource base into a no-go zone.
Ukraine is a victim – and Europe does nothing because winter looms and Putin can turn the heat on or off. His aim is not popularity; he has three objectives:
• The permanent establishment of Russia’s natural gas monopoly in Europe. This requires the destruction of all potential competition such as shale gas development or making Ukraine’s eastern energy fields, and Crimea’s well-endowed offshore, off limits. (Corollary to this is Russia’s collusion with Iran, with its huge gas reserves, that amounts to co-opting a potential competitor.)
• The destruction or blockage of any pipeline that would bring gas from Central Asia or the Caspian Region, or Ukraine, into Europe.
• The establishment and enforcement of a Russian pipeline monopoly. Plans are to bypass the Ukrainian gas pipeline system in favor of three all-Russian routes: the so-called “South Stream” route that will cross the Black Sea from Russia to Europe; the “North Stream” that crosses the Barents Sea from Russia to Northern Germany and the existing Yamal-Europe line from Russia to Germany.
That’s Putin’s strategy, and has been for years, and only his tactics change.
To Europe, a pipeline monopoly will be disastrous. Russia will be able to raise prices at will, break contracts or provide preferred terms to regions that are cooperative and, conversely, punish those that are not. This will undermine European energy security unless the 28 countries form a united front — and they cannot even agree on sanctions over Ukraine.
For the rest of this column, click here: http://business.financialpost.com/2014/07/25/pax-putinia-how-russias-gas-plan-will-unfold/