Ukraine is located at a strategic crossroads between Russia and Europe. An important transit state for Russian natural gas and petroleum liquids exports heading to Europe, Ukraine has often struggled to balance between the two regional powers. With Russia’s involvement in the country’s ongoing internal conflict dominating the headlines, concerns have once again arisen that Russia may try to use its energy exports as political leverage against both Ukraine and Europe, which opposes Russia’s support for separatists in eastern Ukraine. Yet historically, Russia’s attempts to use its resources to coerce other countries have been largely ineffective.
In 2013, nearly 3 trillion cubic feet of natural gas flowed through Ukraine’s pipeline network, composing an estimated 16 percent of Europe’s total natural gas consumption that year.1 Ukraine’s transport network consists of three major pipelines: the Bratstvo, the Soyuz and the Trans-Balkan. The Bratstvo, translated as the “Brotherhood,” is Russia’s largest pipeline to Europe. It crosses into Slovakia before splitting in two directions, supplying both northern and southern European countries. The Soyuz, or the “Union,” links natural gas networks in Central Asia to Russia. It also supplies gas to northern and central Europe.2 The Trans-Balkan pipeline is responsible for transporting Russian gas to Turkey and the Balkans.
While natural gas plays an important role in Ukraine’s energy mix, the country primarily relies on domestic uranium and coal resources for its energy supply. Coal and nuclear energy account for 28 and 18 percent of the country’s energy consumption, respectively, while petroleum, other liquid fuels and renewable energy resources account for less than 15 percent. Still, Ukraine consumed almost 1.8 trillion cubic feet of natural gas in 2013, but it only produced 700 billion cubic feet.3 The country imported the remainder of its natural gas supplies via the Bratstvo and Soyuz pipelines. Natural gas accounts for roughly 40% of Ukraine’s energy consumption,4 and three-fifths of its imports come from Russia.5 However, recently discovered shale deposits could give Ukraine a way to diversify its sources of natural gas. Current estimates suggest Ukraine holds as much as 42 trillion cubic feet of technically recoverable reserves in its shale plays, and international oil companies like Shell have agreed to explore and develop those resources. Unfortunately, those efforts have been stalled by Ukraine’s crisis; the Yuzivska field (one of two major Ukrainian shale deposits) sits almost entirely within the country’s war-torn east.
Russia’s recent annexation of Crimea and alleged involvement in Ukraine’s internal conflict have reawoken fears in Europe that Russia could try to use its substantial natural gas exports to influence Ukrainian (or even European) foreign policy decisions. But Russia’s previous attempts to use natural gas cutoffs as a political weapon were not terribly effective in swaying other countries’ policies; any future attempts likely would not see much more success, despite widespread beliefs to the contrary. Though natural gas is less fungible than oil, Ukraine could likely ramp up its gas imports from several of its European neighbors, including Slovakia, Hungary and Poland, while tapping into its own underground stores to compensate for a loss of Russian supplies in the event of a disruption in natural gas flows from Russia.
While Ukraine’s internal conflict continues, it is unlikely that the country will be able to exploit its newfound shale resources. The European Union and United States have stepped up their economic sanctions against Russia, which (coupled with low oil prices) have hurt an already ailing Russian economy. Still, Russian President Vladimir Putin’s strategy in Ukraine has not appeared to shift in response to the financial pressure. Meanwhile, pro-Russian rebels and Ukrainian officials have agreed to multiple cease-fires, but the fighting continues. High-level talks by French and German officials with their Ukrainian and Russian counterparts have also been largely unsuccessful.