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How Natural Gas Has Helped Fuel Ukraine’s Violent Unrest

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"How Natural Gas Has Helped Fuel Ukraine’s Violent Unrest"

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Demonstrators gather during a rally in downtown Kyiv.

Demonstrators gather during a rally in downtown Kyiv.

CREDIT: ASSOCIATED PRESS

Ukrainians continued to blockade streets and occupy government buildings in Kyiv on Friday, vowing to expand their mass protests until the current government is gone. Activists are calling for Ukrainians to join a ‘March of a Million’ in Kyiv on Sunday, deeming it “the last chance.”

The demonstrations are the country’s largest since the Orange Revolution of 2004, and crowds swelled to an estimated 350,000 people in Kyiv alone last Sunday, their outrage fueled by a brutal police crackdown that left hundreds of people injured.

The protests began on November 22, after President Viktor Yanukovych reversed course and refused to sign political and trade agreements with the European Union that had been in the works for years after heavy pressure from Moscow to abandon the agreements. In the weeks leading up to this about-face, Ukraine and Russia appeared to be headed for a major feud over natural gas.

In October, Russia complained that Ukraine owed $882 million for gas delivered in August. “Ukraine, which pays around $400 per 1,000 cubic metres of Russian gas, one of the highest prices in Europe, has asked Moscow to ease terms it considers excessive and unaffordable for its debt-strapped economy,” Reuters reported at the time. As the date for signing the EU agreements neared, Russia warned of economic catastrophe and civil unrest if Ukraine signed the accords and offered an alternative: join our customs union instead.

Ukraine has long been dependent on natural gas from Russia and that dependence has been a key source of strife between the two nations for several years. Russia has raised the price it charges Ukraine for gas several times and has been known to shut off gas supplies, even in the middle of winter, over payment disputes. Complicating the tug-of-war over Ukraine even more, Ukraine controls the pipeline that transports Russia’s natural gas to the rest of Europe — with Europe currently dependent on Russia (and Ukraine) for 40 percent of its natural gas.

In an attempt to lure Ukraine toward its union of former Soviet republics and away from the EU, Russia offered something it knew its neighbor needed: cheaper gas prices. “No one other than Russia can provide Ukraine with the necessary funds so quickly and in such a quantity,” Russia’s First Deputy Prime Minister Igor Shuvalov told Bloomberg News. “A gas agreement could help relieve Ukraine of a huge problem. We can also give them a loan, but we will not help them without commitments on their part.”

After the EU accords had been scuttled and Yanukovych turned his attention back to Russia, Ukraine’s national energy company announced on Tuesday that it had reached an agreement with Russia’s Gazprom to delay payments for winter fuel deliveries to spring of next year, RIA Novosti reported. Gazprom’s CEO disputed the account, saying Ukraine owed over $2 billion for gas deliveries this year and an agreement to pay back the debt had not been reached.

On Wednesday, Russian Prime Minister Dmitry Medvyedev urged “stability and order” in Ukraine as a Ukrainian delegation arrived in Moscow “seeking cheaper gas and financial aid to close gaping external deficits that could set off a balance of payments crisis,” Reuters reported. The talks could be critical, as Ukraine’s dire economic situation continues to worsen. Negotiating cheaper gas from Russia could afford Ukraine some much-needed time to find outside funding to pay off its massive debts. Including the private sector, Ukraine will have to make debt repayments of more than $60 billion next year — equivalent to one third of the country’s gross domestic product.

Earlier this year, Ukrainian Prime Minister Mykola Azarov said Ukraine routinely overpays for the gas it receives from Russia, to the tune of $20 billion over three years.

For its part, “Russia vehemently denies using trade embargoes and gas deliveries as a form of intimidation against Ukraine and says it is only taking measures to protect its own economy,” according to RIA Novosty.

In an effort to take steps toward energy independence, Ukraine signed two major shale gas deals with Royal Dutch Shell and Chevron this year. Chevron’s investment in the project could reach $10 billion and, if significant reserves are found, could be “a game changer,” according to analysts. The U.S. Energy Information Administration estimates Ukraine has 42 trillion cubic feet of recoverable gas, enough to meet the country’s demands for several years, but extracting it requires the controversial practice of hydraulic fracturing, or fracking. Because of the threat it poses to groundwater and other environmental and public health concerns, fracking is largely out of favor in Europe.

In nearby Romania, locals continue to fight a Chevron shale gas project, claiming they were beaten by police and forcibly removed from their makeshift camp near the drilling site. Prime Minister Victor Ponta responded to the treatment of anti-fracking protesters around the country by saying that “the actions of the gendarmes were 100 percent according to the law and I congratulate them for this.”

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