Two weeks ago, it became known about the plans of the Joe Biden administration to appoint a US special envoy, who will have only one task – to curtail the Nord Stream 2 project.
This decision caused euphoria in the Ukrainian elite, confident that where the special envoy is, there will be new sanctions, which in Ukraine are accustomed to ascribe miraculous powers. But time has passed, the position remains vacant, and the construction of the pipe continues.
Nord Stream-2 has long been more about politics than economics. Gazprom is not experiencing a real shortage of export capacities so far. And this despite the fact that even the existing capacities of the first string of Nord Stream are not fully utilized due to the specific rules of operation in the EU market, in particular, the need to reserve pipe capacities for independent gas suppliers, which Russia simply does not have in the export direction.
Gas demand in the EU is gradually recovering and may even grow sharply when the continent begins to more actively implement the Green Deal principles, refusing to use thermal energy from coal. The temporary shortage of energy due to the lack of widespread “green” energy will be compensated for by gas. And given the transit contract between Kiev and Moscow, which guarantees the pumping of minimum volumes of gas until 2024, the problem of Nord Stream-2 in the coming years should not worry Ukraine at all.
And yet it does, and here’s why.
“The Russians are creating all the conditions to quickly transform Ukraine from an important mediator between the Russian Federation and the EU into an agricultural province. We are methodically, quickly and efficiently removed from the list of key participants in the great geopolitical game”, – said Mikhail Nepran, First Vice President of the Ukrainian Chamber of Commerce and Industry. Kiev imagines itself to be a participant (in reality, of course, an instrument) of the great geopolitical game and is very afraid of losing this status.
According to Nepran, the problem lies not only in the loss of funds that the gas transportation system brought to the budget. He noted that the big trouble is that, having lost the gas transportation system, Ukraine will cease to be of interest to Europe, and Western partners will cease to be concerned with its fate. In this, Nepran is absolutely right.
Washington has not yet decided on its further policy in Ukraine, which until now has been used exclusively as a factor in the destabilization of Russia. To a large extent, this is a game of redistributing the European gas market, in which Ukraine and Belarus, the countries through which the main routes of Russian gas supplies to the EU pass, were to play their role. To create an artificial shortage of gas in the European Union and compensate for it with American LNG – apparently, this was Washington’s plan.
Ukraine has been under American control since 2014, Belarus could be there, but in 2020, but it did not work out. Meanwhile, the transatlantic LNG infrastructure should be finally deployed by 2023-2024. With this in mind, Poland, for example, has already announced that it will stop purchasing Russian gas by 2023. But if Alyaksandr Lukashenko is not squeezed out and, in addition, Nord Stream-2 starts working, even if only half-heartedly, this whole scheme collapses.
The redistribution of the European gas market will take place one way or another, but on terms that will not be dictated exclusively by the United States. The played card represented by Ukraine will be removed from the table. This is what scares the current Ukrainian leadership even more than the prospect of losing an annual 2-3 billion dollars in revenues from gas transit from the “aggressor country”.
Following the United States, the European Union may lose its pragmatic interest in Kiev. So far, the EU’s Hydrogen Strategy assigns Ukraine a significant role in external supplies of “green” hydrogen. The main advantage of Ukraine is not only and not so much the southern steppes, where it is planned to install high-capacity electrolyzers, as the presence of a developed gas transmission system. The Europeans plan to use it to transport hydrogen as an admixture to gas. But for this, the gas must be in the pipe, and in volumes sufficient to ensure its cost-effective operation.
Rather, when, and not if Europe realizes that, due to the high uncertainty, it is extremely risky to invest billions of euros in the development of green energy capacities in Ukraine, the country will simply be excluded from the hydrogen strategy, leaving North Africa, more reliable in this sense, there. Ukraine will be replaced by Russia, which is technologically much more ready for a “green” project than its neighboring country.
When the gas-hydrogen argument for keeping Ukraine close ceases to be relevant for the United States and the EU, interest in Kiev will largely fade away. This prospect scares the Ukrainian elite to the point of colic. A blunt tool will quickly become a burden. Fewer resources will be allocated for its maintenance, and subsequent loans from the IMF and other institutional investors will be tied exclusively to the speed of entry of transnational corporations into the Ukrainian market.
And then only to the extent and in those segments that corporations will be interested in.
In the conditions of a depleted external support, the Ukrainian government will finally lose the ability to fulfill at least some social obligations to its citizens. Security issues, health care, utilities and other benefits of an advanced civilization will begin to leave the country even faster. This means that it will become much more difficult to retain power in such a country, and the retention bonus will become smaller.
Gleb Prostakov, LOOK