We noted in our analysis “Bloody Stream to Europe” on 24 January 2014 that events in Ukraine have not only internal motivations, but also external stimulation, including a serious gas motive in Russian foreign energy policy. The war in Kyiv, as it is called, should help advance the Kremlin’s South Stream in Brussels. Russian plan envisioned that, against the background of increasing destabilization in Ukraine, the EU had to meet Russia’s move in the question of excluding the South Stream project from the Third Energy Package. However, this did not happen, though a definite movement of European Commission towards Gazprom was observed.
Now against the background of a gradual evolution towards stabilization in Kyiv and in Ukraine as a whole, it becomes important for Russia to launch an additional round of destabilization in order to continue arguing with Brussels for the need to support South Stream and the early adoption of the relevant decision to exclude it from the Third Energy Package.
This trend is actually enhanced by the fact that for 100 “hot days” in Ukraine there were no incidents involving the transit interruption of oil and gas supply from Russia to Europe. The piping system worked and works normally. But despite this, the thesis of the transit unreliability of Ukraine is not only continuing, but there are some attempts to saturate it with additional arguments. Some estimates by pro-Gazprom think tanks in Moscow are quite frank (for instance “South Stream is proved”:
– Ukraine today is not a safe state. And thank God that this time a transit interruption did not occur. But what will happen next?
– A Ukraine plunging into chaos is a colossal transit risk.
– The pipe will turn into the main instrument of pressure on Russia under the slogan, “if you do not give us discounts transit will stop”
The summary of the publication is rather demonstrative: “Now… there is no longer any question about the indispensability of South Stream. The Yamal-Europe 2 pipe through Belarus is also necessary, albeit with a corrected route: it should go to the south of Poland, because there is a “hole” on the axis: south of Poland – Slovakia – Austrian hub Baumgarten. Thus, we will fully close Ukraine for volumes and routes.”
Russia is now deploying a destabilization scenario in Crimea. This is done not only because of the existence of a phantom pain for a lost Crimea, but based upon some problems related to realizing the South Stream project. As we have already noted, the cost of the implementation of all its modules is enormous: € 56 billion, of which € 16.5 is the cost of sea and land (in Europe) segments. The question is about the optimizing of investments. It is unlikely to be focused on reducing costs. Most likely it is about the redistribution of costs between the foreign and Russian sections of the route, certainly to the benefit of the Russian modules of the Southern Corridor. M. Korchemkin from the Center of East European Gas Analysis considers the Crimean scenario as a variant of the sea route optimization of South Stream, which is due to the exclusive economic zone of Ukraine extending far to the south, which extends the offshore section significantly.
Analyzing the optimization options, one should pay attention to the Crimean route, which can make the South Stream combined. From a sea project exclusively, it can be transformed into a sea – land (Crimea) -sea route:
It’s worth remembering, that former President of Ukraine Viktor Yanukovych suggested the Crimean option of South Stream to Russia at the Yalta European Strategy VIII Conference on September 17, 2011:
“This project is a lot cheaper than the proposed one, the cost of which is now estimated at about $ 25 billion. And the route that we offer now will cost 80% less”
Gazprom considered this proposal impractical. Deputy Chairman of the Board of Gazprom Valery Golubev said that it could be done through Crimea, Evpatoria and further – in the Black Sea, but what is the point when you can break it just directly. Probably now the direct thinking of the Kremlin has changed to an indirect version under the influence of geopolitical and kleptocratic problems at a time when the economy takes a back seat.
Of course, there are other options for optimization, but they require changes in the starting position of the project – the Russkaya Compressor Station on the Black Sea coast. On December 6, 2013 equipoment installation began. This CS is also the final destination of the Southern Corridor pipeline system from Yamal to the Black Sea.
Russkaya CS. Left – model, right – photo of the building plot. December, 2013
In autumn 2014, construction of the offshore section of the pipeline is scheduled to begin. And it will be held in the most deep water bottom zone of the Black Sea, where depths are 1900-2200 meters. However, the combined route, if Crimea is annexed, will be on the shallower coastal shelf, and not on the bottom zone of the sea:
Last year in November Gazprom began to speak about the probability of making some adjustments to the project. But whether there will be such a large-scale adjustment is hard to say. Perhaps an indicator will be the change of the capacity of the Russkaya CS. Now it is pompously claimed as the most powerful in the world, with an installed capacity of 448 MW. For the Crimean route, this capacity is redundant because both depths and distances are substantially reduced. In addition, in Crimea two compressor stations could be installed, providing further gas pumping through the peninsula, and through the sea.
Separating and then annexing Crimea gives Russia the solution to a number of strategic issues in the framework of the Pax Putiniana:
– gas connection of Crimea, which is currently almost dependent on Ukraine forinfrastructure and resources, to Russia;
– neutralizing or taking under Russian control upcoming gas exploration and extraction projects in the Black Sea, which were initiated by Ukraine with the engagement of leading European and American companies;
– depriving Ukraine of access to the major part of the explored offshore gas deposits and prospective hydrocarbon resources in the Black Sea;
– forcing leading American and European oil and gas companies out of the Northern segment of the Black Sea;
– depriving a rump Ukraine without Crimea of the main area for an exclusive economic zone in the Black Sea.
Also the question of ‘Crimea in exchange for gas’ could be raised. A year ago the pro–Russian forces in Crimea actively used this thesis after Gazprom raised the issue of the USD 7 billion claim against Naftogaz. It is clear that such a thesis was not a home-made creation by the separatists from the Sevastopol–Crimea–Russia front. It was the execution of directives from Moscow. Now, after Yanukovych’s failure, the Kremlin is modifying its Anschluss scenario for Ukraine and is preparing Crimea’s background for the bidding with the new authority in Kyiv. With “Lady Yu’s” return to the political life of Ukraine, Russia can start the game like the one that ended with the discriminatory gas contracts of January 19, 2009 for Ukraine and the Kharkiv agreement of April 21, 2010 for Yanukovych with the Black Sea Fleet of Russian Federation staying in Sevastopol till 2042. One can only hope that Maidan and NSDC will not allow anyone to step on the same rake of 2009 (Moscow gas contracts) and 2010 (Kharkiv agreement). Any gas agreement with Russia should not be signed without NSDC approval, the structure of which should also be reformatted quickly.