by Vitalii Usenko and Dmytro Usenko
The conflict between Russia and Ukraine is widely linked to geopolitics; defence considerations; and Putin’s fear of a Maidan in Russia. There are more motives which could be playing a considerable role in this conflict: the “Wild West scenario,” about which many Kremlin analysts have written.
The Kremlin calls it the “Western scenario for the disintegration of Russia.”
The scenario can be briefly summarized as follows:
- To bring into war two Slavic nations – Russia and Ukraine;
- To observe, from the outside, this clash restricting the response to only economic sanctions against Russia;
- To wait until Russia is considerably weakened and starts to disintegrate and, only then;
- To interfere and to take control disintegrating Russia’s territories.
The years 2007-2009 saw many futuristic forecasts by Russian analysts of Russian involvement in a global military conflict in the 2010s, with very disastrous consequences for Russia. A series of books, “Baptism with Fire,” authored by the Russian nationalist, of Ukrainian origin, Maksym Kalashnikov, describes scenarios of disintegration, the division of Russia into separate territories and the occupation of Russia by the West and China. A joint attack by NATO and China was described in a book of this series “Star of captivating risk.” This scenario also mentions a so-called “Crimean Kosovo” plan. Kalashnikov, in 2012, also described an apocalyptic scenario in his book “Collapse of Putin’s Russia: The darkness at the end of tunnel.” In it, the author explores the collapse of Putin’s Russia as a result of disturbances in the financial world and the competition for resources.
How the Russian Far East could be turned into a Chinese province due to Russia’s weaknesses was explored in detail by Ren-TV (Russia) in its program "Military Secret" broadcasted on September 25, 2009. Russians in 2009 supposed how China could annex the Russian Far East and, very interestingly, these would-be-Chinese strategies are being used by Russia currently to annex Crimea and possibly all of Eastern and Southern Ukraine. Russians have even complained that the Chinese think that many Russian Far East territories were unfairly annexed by Russia from China in the past.
What surprises me is why Russia is acting out the scenarios that scare the Kremlin most. If Russia expected these scenarios, why is Russia acting in such a suicidal way? What could be hidden behind this?Perhaps Russia has criminal predatory intentions and their goal is simply looting. Russia will try to seize not only Crimea, but also the Ukrainian Black Sea Shelf and all of Eastern and Southern Ukraine and, if lucky, all of Ukraine. By putting Crimea under its control, Russia opens the way for Gasprom, Lukoil and Rosneft and can oust Western Oil and Gas competitor companies such as Eni S.p.A., Italia, Electricite de France, ExxonMobil, Shell as well as Ukrainian oil and gas companies from developing oil and gas deposits in this region.
Ukraine has signed a production-sharing agreement (PSA) with Eni, Electricite de France, Chornomornaftogaz and Water of Ukraine LLC for the development of the Subbotina, Abikha, Mayachna and Kavkazka blocks in the Black Sea in November 2013. Now, all these deals have gone by the wayside.
Before the overthrow of former President Viktor Yanukovych, Ukraine was on the verge of signing a deal with a consortium, including Exxon Mobil (XOM) and Royal Dutch Shell (RDS.B), that was prepared to spend $735 million to drill two wells off Crimea’s southwest coast. “Exxon and Shell are now in a legal limbo,” Chris Weafer of the Moscow investment group Macro Advisory told Bloomberg News on March 11, 2014.
Ukraine’s Black Sea Shelf oil and gas deposits active exploration goes back to 2008. At that time, Yulia Tymoshenko torpedoed the deal with Vanco for the exploration and production of a huge offshore sector off the Kerch Strait. Considering illegal the transfer of the rights of Vanco International to Vanco Prikerchenska Ltd – a company registered in the Virgin Islands and including among its shareholders a subsidiary of SKM, Rinat Akhmetov’s holding company – on May 21, Yulia Tymoshenko signed an edict that cancelled the production-sharing agreement linking Ukraine and Vanco, as mentioned in Wikileaks, Ukraine Intelligence No. 59, July 2nd, 2009. Being in opposition, Yulia Tymoshenko said that the Black Sea Shelf would have to be returned to the state after a change in power.
In 2012, Ukraine chose Americans over Russians to develop the Black Sea Shelf. As reported by Kostis Geropoulos, Energy & Russian Affairs Editor, New Europe, on August 15, 2012, Ukraine’s Environment and Natural-Resources Minister Eduard Savitskiy said Kyiv has selected a consortium of ExxonMobil, Royal Dutch Shell, Romania's OMV Petrom and Ukrainian state firm Nadra Ukrainy to develop the Scythian area in the Black Sea. "The government has supported a proposal … to sign a production-sharing agreement naming a group of companies, led by ExxonMobil as operator," Stavitskiy told reporters.
Ukraine considered Western investors as "more preferable for Ukraine than LUKoil.” In the long-run the development of the Black Sea could have provided a material boost in gas production in Ukraine, leading to the decrease in the country’s reliance on Russian gas, replacing it with domestic production.
If we take a look at the recent declarations from the self-proclaimed government of Crimea, we see as a top priority the nationalization of companies in Crimea. Among the companies that would be nationalized is Chornomornaftogaz, which is the Crimean subsidiary of Naftogas Ukraine.
Any new deals regarding the development of Black Sea oil and gas deposits would be provided most probably to one of the Russian companies, such as Gasprom, Lukoil and/or Rosneft. Rosneft’s interest in this region is indirectly confirmed by the fact that Rosneft recently was involved in geological exploration of the Russian Exclusive Economic zone of the Black Sea (in the area known as Tuapse Curve).
Russia has also planned to launch South Stream, a gas pipeline to transport Russian natural gas through the Black Sea to Bulgaria and further to Greece, Italy and Austria. Construction of South Stream started in December 2012; the first commercial deliveries were scheduled for late 2015. It was planned for South Stream to bypass the Exclusive Economic Zone or continental shelf of Ukraine. This extension of the submarine route by some 100 km adds $1.3-1.5 billion of investment cost to this project, not mentioning the additional maintenance costs in the future. Worth noting is that the new route of South Stream goes through the Türkiye Exclusive Economic Zone. Türkiye is a NATO member and could have an interest in alternative gas pipeline transport projects as well as other interests in their Black Sea Exclusive Economic Zone contradicting Russia’s interests.
The South Stream pipeline is a direct competitor of the Nabucco West pipeline (also referred to as the Türkiye–Austria gas pipeline), a proposed natural gas pipeline from the Turkish-Bulgarian border to Austria. The Nabucco West pipeline lost a contest to ship Azeri gas to Europe, but remained on a list of projects warranting EU energetic safety. European Commission officials have repeatedly said Nabucco West is not dead and could one day be built if more Caspian gas becomes available. Taking into consideration recent developments in Ukraine and Russia, in order to decrease dependence on Russia’s gas supply, this project could be revived.
War against Ukraine could allow Putin to maintain or increase oil and gas prices. The concern of the Kremlin is that the US is surpassing Russia in terms of oil and gas production. In June 2013, oil and gas extraction and the corresponding combustibles in the US saw daily volumes exceeding 22 million barrels while Russia produced only 21.8 million barrels. Oil provides nearly 40% of the government's tax revenues in Russia.
The Russian government requires an oil price of above $125 in order to achieve fiscal breakeven. “If the oil price is $80 per barrel, the budget deficit will widen to 3 percent of GDP," Russian Finance Minister Alexei Kudrin said in 2012. The Russian economy would be able to function normally for at least one year if oil prices dropped to $60 per barrel, Russian Finance Minister Alexei Kudrin said in 2011. But, in reality, such a price plus economic sanctions could crush the Russian economy far sooner. The share of oil and gas exported to non-CIS countries in the first half of 2013 was 42.81%; mineral resources 43.28%; metals 43.5% metals; and all other goods only 2-3%. In January 2014, the share of oil and gas exports to non-CIS countries was 77.5%. That is why a decline in oil revenues could usher in a major crisis, forcing cutbacks to major spending programs such as pensions and subsidies that underpin the stability of the Putin regime.
Besides the importance of the Black Sea Shelf for dominating in the oil and gas sectors, there is another reason for controlling Eastern and South Ukraine. All major industrial and strategic objectives important for Russia are concentrated in such regions as Donetsk, Kharkiv, Dnipropetrovsk, Zaporizhzhia, Mykolayev, and Kherson. Industry in these regions is closely integrated with Russian industry, especially in the military-industrial complex, such as launch vehicle and carrier rocket production, production of turbines for nuclear power plants, production of ships and planes. This is crucial for the rearmament and re-equipment of the Russian army, as planned in the Russian State Program of armaments development for 2011-2020.
As stated by Vladimir Putin the percentage of new armaments in the Russian army will be 30% in 2015 and 70% in 2020. These plans could be under question as to move the production of items necessary for the military-industrial complex of Russia from Donetsk, Kharkiv, Dnepropetrovsk, Zaporizhzhia, Mykolayiv to Russia is not an easy task.
Therefore, I conclude that to achieve its economic expansion goals and military and defence goals, controlling only Crimea is not sufficient for Russia. All of the Black Sea and Azov Sea regions as well as all of Eastern and South Ukraine would need to be controlled, in order to have sustainable results. Russia most probably is planning to seize not only Crimea but all of Eastern and Southern Regions of Ukraine, first of all Donetsk, Kharkov, Dnepropetrovsk, Zaporizhzhia, Odesa, Nikolayav and Kherson. In addition to controlling oil and gas reserves, Russia would have to control the energy and water supply from continental Ukraine. Russia’s plans for the rearmament and re-equipment is also a factor.
A strong, and unexpected by Russia, resistance by the Ukrainian army, the failure to fully destabilize Eastern and Southern Ukraine as well as unexpectedly strong pressure from the West would force Russia to think about a backup scenario. This scenario, if military intervention fails, could be to put Crimea and possibly all of Eastern and Southern Ukraine under the protectorate of Russia, formally leaving them as a territory of Ukraine.
Written by: Dr. Vitalii Usenko, MD, MBA, expert of the Center of Military-Political Studies in the sphere of psychology of communications, and by Dmytro Usenko, student at Rotman School of Management, University of Toronto
Eedited by Olena Wawryshyn
Sources: 1. Ukraine Crisis Endangers Exxon’s Black Sea Gas Drilling: Energy – Bloomberg - March 11, 2014http://www.bloomberg.com/news/2014-03-10/ukraine-crisis-endangers-exxon-s-black-sea-gas-drilling-energy.html
2. Losing Crimea Could Sink Ukraine's Offshore Oil and Gas Hopes – BloombergBusinessWeek - March 11, 2014
3. Ukraine signs PSA with Eni, EDF for Black Sea blocks – KyivPost – November 27, 2013,
4. Ukraine picks Americans over Russians to develop Black Sea shelf by Kostis Geropoulos, NewEurope, August 17, 2012
http://www.neurope.eu/article/ukraine-picks-americans-over-russians-develop-black-sea-shelf
5. Wikileaks, Ukraine Intelligence No. 59, July 2nd, 2009
http://wikileaks.org/gifiles/attach/175/175406_UIA_59.pdf
6. Tymoshenko: Black Sea shelf to be returned to state after change of power – KyivPost – February 9, 2011
7. Выгода от Крыма? Шельф Черного моря – TheKievTimes – March 7, 2014
http://thekievtimes.ua/politics/334931-vygoda-ot-kryma-shelf-chernogo-morya.html
8. Владимир Милов: «Газпром» приватизирует все нефтегазовое имущество Украины в Крыму – Главком – March 12, 2014
http://glavcom.ua/articles/18168.html
9. Путина в Украине привлекают месторождения газа, - экс-замминистра энергетики России – Цензор.Нет – March 13, 2014
10. Западные нефтяные компании боятся инвестировать в проекты на украинском шельфе Черного моря – Укррудпром – March 12, 2014
http://www.ukrrudprom.ua/news/Zapadnie_neftyanie_kompanii_boyatsya_investirovat_v_proekti_na_u.html
11, Путин может отказаться от войны с Украиной взамен на получение протектората над Крымом – эксперт – УНИАН – March 14, 2014
12. The Foreign Minister of Russia spreads lies about Donetsk and threatens to take it under protection - Euromaidan PR, March 14/ 2014
13. South Stream bypasses Ukrainian shelf, by Mikhail Korchemkin, East European Gas Analysis (www.eegas.com) - August 5, 2009
http://www.eegas.com/Turkish_shelf.htm
14. South Stream web-site
15. Failed Nabucco West plan still on EU priority list-sources – Reuters - Sep 20, 2013
http://www.reuters.com/article/2013/09/20/eu-energyprojects-idUSL5N0HG26S20130920
16. Операция "Механический апельсин", Игорь Джадан, Русский Журнал, April 21, 2008
http://www.russ.ru/pole/Operaciya-Mehanicheskij-apel-sin
17. War against Ukraine would allow Putin to maintain oil and gas prices - Euromaidan PR, March 10, 2014
18. Russia’s Petroleum Industry At Critical Juncture, Special To Pipeline & Gas Journal, September 2013, Vol. 240 No. 9
http://www.pipelineandgasjournal.com/russia%E2%80%99s-petroleum-industry-critical-juncture
19. What Would Falling Oil Prices do to Russia's Geopolitical Ambitions? By Al Fin/ December 10, 2012
20. Анализ экспорта и импорта Российской Федерации за 6 месяцев 2013 года – ПроВЭД – August 19, 2013
http://провэд.рф/analytics/research/5866-analiz-export-import.html
21. Экспорт-импорт важнейших товаров за январь 2014 года – TKS – March 07, 2014
http://www.tks.ru/news/nearby/2014/03/07/0005
22. Военная тайна №23 (18.09.2009), Ren-TV (Russia) – September 18, 2009
https://www.youtube.com/watch?v=ZRBmiiwhuy8
23. Военная тайна №24 (25.09.2009) Ren-TV (Russia) – September 25, 2009
24. Перевооружение российской армии идет в хорошем темпе, заявил Путин – РИА Новости, November 29, 2013
http://ria.ru/defense_safety/20131129/980738733.html
25. Перевооружение российской армии будет ускорено – Оружие России
http://www.arms-expo.ru/049057054048124054053054051.html
26. Российская государственная программа развития вооружений на 2011— 2020 годы
http://webdiscover.ru/200832.html
27. Рогозин: после угроз США перевооружение армии РФ не вызывает сомнений – РИА Новости – March 8, 2014
http://ria.ru/world/20140308/998749521.html
28. Максим Калашников. “Крещение огнем. Звезда пленительного риска”, Москва, Фолио, 2008
29. Максим Калашников «Крах Путинской России. Тьма в конце туннеля», Москва, Яуза, 2012
