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Can U.S. Fracked Gas Save Ukraine?

The conflict over Crimea may prove a last gas…p for Russian energy warfare
priest-between-battle-lines
priest-between-battle-lines


CAUGHT IN THE MIDDLE: The Ukraine finds itself at the mercy of Russia's supply of natural gas after protests toppled a corrupt but pro-Russian government.
Courtesy of Sasha Maksymenko / Flickr 

Ukraine is on its own, not least when it comes to energy—and that crimps the country's ability to respond to Russia's land grab in the Crimean peninsula. Ukraine relies on Russia for roughly two thirds of its natural gas supplies, suggesting that the current geopolitical impasse will likely continue to fall in Russia’s favor. Even with a few months of natural gas in storage, "they're in a tough spot if those supplies are cut off," notes Jason Bordoff, one-time Obama administration policy advisor and now director of Columbia's Center on Global Energy Policy, who was a speaker on a panel of experts at Columbia University’s School of International and Political Affairs (SIPA) on March 10.
 
Russia has the leverage to use its energy supplies as a political cudgel in Ukraine or the rest of Europe—the European Union imports one third of its gas from the eastern giant—and has not hesitated to use it in the past, most recently in 2009. Western Europe’s gas purchases from Russia (then the Soviet Union) started in the early 1970s, mostly as symbolic trade—part of the policies of Cold War détente and Ostpolitik (the latter, West Germany’s unilateral attempt to normalize relations with the U.S.S.R.). The resulting energy trade with Germany expanded to other Western European countries in the ensuing decades, and grew to become what some critics of détente had always feared: dependence on Russia by Western Europe for essential energy supplies.
 
This vulnerability may not persist indefinitely, however. In fact, this could conceivably be the last time Moscow will be able to use gas as a weapon. The world’s fracking-enabled natural gas boom may, over time, upset this status quo, if not as soon as U.S. politicians would like because fracked gas cannot serve as a bargaining chip in the current crisis.
 
That's not just because U.S. natural gas supplies are currently low after a cold winter. Supplies will soon rebound as the U.S. enjoys an ongoing surfeit of natural gas, thanks to new techniques to free the hydrocarbons embedded in deep shale. This can not only help bolster energy independence, but eventually could also weaken the petrodollar flow into the Putin regime.
 
But the U.S. has little ability to export that gas bonanza at present. Although six projects have already been approved for such export—totaling 240.7 million cubic meters of liquefied natural gas, or three times more than Ukraine imports from Russia presently, according to Bordoff—none of that will be ready for export before 2015, at the earliest.
 
Ukraine itself also has significant shale deposits. U.S. technology and expertise could also be shared to help develop their own natural resources, Bordoff argues. In addition, improvements to the energy efficiency of industry in that country that still has an economy in transition from communism to capitalism could help cut the use of natural gas significantly, as could the development of renewables. "This is not for today's crisis but for the next one," Bordoff admits.
 
The Europeans could also be weaned off Russian gas, putting them in a position to take a harder stand against Russian aggression in Ukraine and elsewhere in the future. But that would require them to pay more for their gas fix, outbidding Asian markets like Japan for natural gas from countries like Qatar. "The E.U. would like to do something but are in a position economically where they realize they don't have much latitude," says economist Jan Svejnar, director of the Center on Global Economic Governance at SIPA. "The gas discovery [in the U.S.] is helping a lot in the sense that it alleviates some of the really tough constraints imposed on the behavior of Western countries."
 
In the end, fallout from the current debacle may impel political and economic change. After all, there is no better way to drive Ukraine toward the E.U. and U.S. and away from Russia than what Putin is doing now, including potentially cutting off the part of Ukraine that most reliably voted in favor of pro-Russian candidates.
 
In the meantime a new, albeit much diminished, Cold War seems well underway. The assurances about territorial integrity offered to Ukraine by Russia, the U.S. and the other permanent members of the U.N. Security Council in 1994 in exchange for that country to relinquish to Russia the Soviet-era nuclear weapons based there seem moot. And the only weapon the West has—new supplies of fossil fuels—is also one that imperils the globe via climate change. "This is a lose–lose situation for all sides," said Richard Betts, director of SIPA's International Security Policy program. "But I am a pessimist by nature, so I always hope to be proven wrong."
 
Additional reporting by Michael J. Battaglia.
 

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