For Yanukovych’s government, a key priority in the energy area seems to be the establishment of a Ukraine-European Union-Russia consortium to manage Ukrainian natural gas pipeline system. Such an approach has obvious benefits. Ukraine’s huge pipeline transit system transported around 120 billion cubic meters of natural gas to Europe in 2008. But such an approach will not remove the risk of Ukraine having to rely on Gazprom as its single major supplier of natural gas.
One way that Ukraine could replace this risk is through supplier diversification. That could be accomplished by participation in alternative gas supply projects, such as the amended White Stream project and Nabucco pipeline.
The traditional White Stream natural gas pipeline was originally Ukraine’s 2005 initiative. It envisaged the supply of natural gas extracted at Shah Deniz field in Azerbaijan going to Ukraine, Romania and onwards to Europe via the combination of a land and sea pipeline route.
Initially, it was supposed to carry eight billion cubic meters of natural gas and could increase the capacity to as much as 32 billion cubic meters after sourcing gas from Turkmenistan. The White Stream project was a competitor to the 31 billion cubic meters Nabucco pipeline that was designed to be sourced with non-Russian gas and bypass Ukraine’s transit system. The White Stream project received the initial financial support from the EU and was named a priority project by the European Commission in 2008.
The White Stream was a central energy-related project in the Washington-backed GUAM [Georgia, Ukraine, Azerbaijan and Moldova] association. It would have supported Ukraine’s ambition to become an alternative to Russia regional leader among the former Soviet countries.
The 2008 Caucasus military conflict, and the subsequent 2009 Ukraine-Russia gas confrontation, raised questions about Ukraine’s reliability to transit gas. The reset of U.S.-Russia relations under U.S. President Barack Obama’s administration and closer ties with Russia seem to place Ukraine as a second-tier player on the Russian periphery.
Under these circumstances, the White Stream project has been largely forgotten. In an April 27 communication to Azeri Trend, the project manager – United Kingdom-based White Stream Pipeline Company — said that the Ukrainian route is not primary for White Stream. But Ukraine may have an option to join in the future.
Some Ukrainian analysts, including Volodymyr Saprykin of the Razumkov Center think tank, think that the success of White Stream is questionable because pipeline route design, gas supply sources and financing remain undeveloped. According to the Georgia Times, Azerbaijan, Georgia and Romania plan to develop a modified project that involves LNG plant in Georgia from where natural gas would be delivered to Romania by sea.
The White Stream project is in competition, but could be complementary to the Nabucco pipeline project that was ratified by the Turkish Parliament on June 4, notwithstanding Russian efforts to promote a rival South Stream pipeline with the potential capacity of up to 63 billion cubic meters per year.
While Ukraine may consider Nabucco a rival from the point of view of securing its pipeline’s transit capacity, it should also regard it as alternative from the viewpoint of energy security. Ukrainian Ambassador to Turkey Serhiy Korsunsky rightfully concluded in an October 2009 article in Zerkalo Nedeli weekly that Nabucco is favorable for Ukraine as it would support a more independent foreign policy and put pricing pressure on Russia. As Ukraine and Turkey have many common interests in economic, political and international security, there may be potential synergies for Ukraine to enhance partnership ties with Turkey.
In his famous 2006 book, The Audacity of Hope, Obama – then a U.S. senator — wrote about Ukraine’s energy dependence on Russia: “President [Viktor] Yushchenko finally won. But today, Ukraine remains almost entirely dependent on…Russia…still finds itself at the mercy of the former patron – a nation that can now influence every political and economic decision they make…”
Seeking alternative gas supply routes is critical for Ukraine’s energy security and independence.
Maksym Bugriy is associate fellow with the independent think tank Ukrainian Institute for Public Policy. He is studying for a Ph.D. in economic security from the National Institute of International Security problems. He can be reached at [email protected]
