Putin’s Ukraine Invasion Is About Energy and Natural Resources
By David Knight Legg, April 5, 2022, WSJ
Much of the current analysis of Russia’s war on Ukraine accepts at
face value Moscow’s stated premises for the invasion. Putin claimed
from the beginning that his special military action was a determined
attempt to reunite the old Russo-Ukrainian territorial and ethnic
communities under his rule. Some in the West have even bought into
his gripe that years of North American Treaty Organization expansion
threatened Russian territorial integrity.
The prevailing narrative now is that Putin has foolishly overreached:
The Ukrainians fought harder than he expected and his forces have bogged
down due to poor command structures and lack of basic operational controls.
He has had to learn the hard way about information asymmetries because no
one tells a dictator the whole truth. The West, according to the narrative, needs to provide him with a peace process: Ukraine guarantees it won’t try
to join NATO and Moscow absorbs Donetsk and Luhansk—as well as what’s left of Mariupol—into Mother Russia.
This is dangerous thinking. Putin’s purposes are multifaceted, and he's adaptive. There is more than one way to dominate Ukraine. Under cover of
the wider conflict, Putin is taking full control of Ukraine’s vast,
extremely valuable energy assets and intends to integrate them into the
Russian supply chain on which Europe now depends. China and India will eventually depend upon it too.
There are 4 reasons to think this war is, or will default to, an energy
heist. The first is Russian national interest. Taking Ukraine’s energy
would give Putin the second-largest natural-gas reserves in Europe, worth
over $1 trillion at today’s prices. It would give him oil and condensate worth as much as $400 billion, and most of Ukraine’s coal—the sixth-largest reserve base in the world. Additionally, he would consolidate an extraordinary strategic geopolitical advantage with ports on the Black Sea and Sea of Azov, putting Russia at the center of global energy supply to the vast European
and Asian markets for the foreseeable future.
The second reason to think this war is a resource grab is Putin’s tactical focus. Russian troops are now concentrated in the parts of Ukraine that hold 90% of its energy resources. They have seized the Donbas and control Luhansk and Donetsk. They are embedded along the Black Sea coast and focusing extreme pressure on Mariupol. If the fighting stopped now, Putin would control all of Ukraine’s offshore oil, its critical ports on the Azov Sea, the Kerch Strait, 80% of the Black Sea coastline, and all critical energy-processing and shipping infrastructure.
The third reason is the treatment of Mariupol. If Putin’s core objective were the reunification of ethnic Russians, then pounding into dust the country’s largest urban center of pro-Russian Ukrainians would be an odd way to manage that reunification. If this is about control of Ukraine’s energy, however, that
city is the essential land bridge to his Crimean assets and the critical port from which to ship resources from Donetsk and Luhansk.
Finally, he’s done this before. Putin’s annexation of Crimea in 2014 gave him
Sevastopol and Ukraine’s exceptionally rich Black Sea assets—a windfall worth
hundreds of billions of dollars. He passed these assets to Gazprom and declared an exclusive economic zone in the Black Sea, defended by the Russian navy.
Sadly, Putin learned from Crimea that the West protests, then forgets.
Despite the imposition of sanctions, European Union imports of Russian energy, enhanced by the annexed assets, continued unabated. Europe is now paying Russia over $100 billion a year, and is on track to import 90% of the energy it consumes by 2030.
Europe is so dependent on Russian gas partly because of climate considerations. Any serious commitment to reducing global emissions from coal requires natural gas. The U.S. has led the world in this regard, reducing emissions by over
800 million tons while promoting economic growth by displacing thermal coal with gas to power the electrical grid. Coal burns at almost twice the carbon intensity of gas per unit of energy, so retrofitting European grids for gas significantly reduces emissions and provides baseload power that renewables can’t. But while the U.S. produced gas domestically, Europe off-shored its gas supply to Russia and banned domestic fracking and other energy production. The result was dependency.
Despotic regimes control most of the world’s energy via state companies.
The democratic West relies on private companies operating in free markets, which have driven most of the innovation in cleaner fuels, carbon capture, nuclear and hydrogen. As NATO reorients itself, member states should pursue trade deals connecting the vast supply and technological innovations of the U.S. and Canada to Europe. The best way to beat this particular thief is to steal back his market.
Mr. Legg is an adviser to investment and political-risk firms. He is a
former principal adviser to Alberta Premier Jason Kenney.
https://www.wsj.com/articles/putins-ukraine-invasion-is-an-energy-heist-natural-gas-russia-ukraine-invasion-oil-nato-conflict-11649186174
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