Russia, Ukraine and implications for the global oil & gas market

By ETEOBONG ITA

To gain insight into factors behind Russia’s recent power projection, one needs to revisit how geopolitical events unfolded following world war II, events that chipped away at the Berlin wall, including its fall in 1989, and what Moscow perceives it has lost in terms of power and prestige.

Beginning on 8 March 1917 to 16 June 1923, this period can be characterised as a time of political and social revolution in the former Soviet Empire. During this period, the Soviet Union abolished its monarchy and adopted a socialist form of government. Following the revolution, a Ukrainian national movement for self-determination emerged. Long story short, Ukraine was once a part of the Soviet empire.

At the end of the 19th century the extent of the Soviet empire stretched over one-sixth of the world’s surface. Spanning from the Pacific Ocean to the peripheries of Western Europe, it seemed invincible. In 1989, winds of change blew over the Soviet Union. The Iron Curtain was torn, laying bare Moscow’s empire. Thirty-three years later, Russia is reasserting itself by projecting military power outside its borders. The move has led to growing unease over new flashpoints in Europe. Notably so because as Russia vies for greater influence, the Baltic has become a frontline.

A sphere of influence is a spatial region wherein a State or organisation may opt to exercise cultural, economic, military or political exclusivity. Following the Soviet Union’s collapse, though some Eastern European countries, the Caucasus, and Central Asia gained independence, in Western eyes they were viewed collectively as subject to Russia’s sphere of influence. Respectively, is Russia a country with ambition to reclaim its sphere of influence?

To gain insight into factors behind Russia’s recent projection of military power, one needs to revisit how geopolitical events unfolded following world war II, events that chipped away at the Berlin wall, including its fall in 1989, and what Moscow perceives it has lost in terms of power and prestige.

At the tail end of world war II the Wehrmacht was overrun and defeated by the Russian army. With Berlin claimed as a buffer zone, Central and Eastern Europe fell under Moscow’s control. Though most Central and East European countries were considered independent – at least on paper, the Kremlin maintained control or influence over them. With the cold war setting in, the buffer offered Moscow a sense of security and superpower status. However, when the Iron Curtain and Europe’s communist regimes collapsed in 1989, the Soviet empire began to lose its grip.

Serving as poignant reminder of a dark history, East Berlin is one place where Moscow found its loss of empire particularly painful. The Soviet War Memorial at Treptower Park, Berlin is the final resting place for more than 7,000 of the nearly 80,000 Soviet and Polish soldiers who died in the Battle of Berlin. Whilst over 20,000 died in Berlin alone, records show the Soviet Union lost 27 million people during World War II. Some commentators have advanced that given the scale of sacrifice, Moscow believed it was entitled to annex East Berlin as part of the Soviet empire.

German words inscribed at the memorial read, Heute erkennen alle an, daß das Sowjetvolk durch seinen aufopfernden Kampf die Zivilisation Europas vor den faschistischen Pogromhelden gerettet hat. Darin besteht das große Verdienst des Sowjetvolkes vor der Geschichte der Menschheit.

In English the words read: “Now everyone recognises that the Soviet people, through their selfless struggle, saved the civilisation of Europe from the fascist pogroms. This is the great merit of the Soviet people to the history of mankind. Viewed as implying that the Soviets saved humanity, the words faced some public scrutiny and sparked debates.”

Wünsdorf – previously headquarters of the Nazis, it later became Russia’s largest military base outside the USSR. At the time dubbed little Moscow by Russian soldiers, East German locals called Wünsdorf the Forbidden City. Backed by a strength of 800 garrisons and half a million troops, the Soviet military presence in East Germany was substantial. In as much as communist Russia assumed its ideology would forever bind East Germany to Moscow, it turned out not to be so. The Berlin Wall fell and within a year everything changed. After the reunification of East and West Germany, Moscow withdrew its troops leaving behind 98,300 rounds of ammunition and 47,000 pieces of ordnance. Shops stacked with electronics, radios, TVs and fridges were abandoned. With homes full of domestic appliances, unceremoniously many Russian families left. Even pets were left behind.

Whilst this editorial raises more questions than it proffers answers, the intent is not to provide answers but to provide an overview of events as they continue to unfold. Is it likely that Russia’s recent projection of military power was driven by its nursing of a resentment towards the West? Does Russia feel it was isolated, cheated and humiliated despite its huge sacrifices in World War II? Perhaps the adage, ‘when two elephants fight the grass suffers’, needs an amendment aptly including more elephants? Ultimately, geopolitics is characterised by interests and shifting alliances. A perceived enemy today may be your ally tomorrow.

Implications for Energy security and supply

According to the Dutch-based company Offshore Energy, in 2020, Russia was ranked world’s third-largest producer of petroleum and other liquids. Figures show Russia’s annual average output was 10.5 million barrels per day (b/d) in total liquid fuels production. In the same year, Russia was ranked second-largest producer of dry natural gas – producing an estimated 22.5 trillion cubic feet (Tcf). In the event that Russia invades Ukraine, some western countries may impose stricter sanctions. Should the sanctions restrict Russia’s access to foreign exchange, oil prices are expected to spike. In February, markets showed that oil prices spiked to a seven-year high amid escalating tensions between Russia, Ukraine and some Western countries.

Historical precedence

A quarter of Europe’s natural gas comes from Russia – 80% of it flowing through pipelines crossing Ukraine. In 2005, mired in a dispute over prices, Russia disrupted gas supplies to Ukraine. Following disruptions that winter, gas supplies through Ukrainian pipelines to Europe plummeted. Gazprom – the Russian State monopoly said sufficient gas was still being shipped via Ukraine to supply other countries, but if they were not receiving their gas allotments Ukraine must be diverting it. Ukraine debunked Russia’s claim, adding that it would divert gas should temperatures drop below freezing. The dispute sent chills threatening to place Central and Western European nations in a firm winter’s grip.

•Ita, an independent journalist and environment consultant writes from Germany.