The state of affairs at the Ukrainian border is now being referred to as a “crisis,” with prominent news outlets such as the New York Times and CNN providing live updates on the rapidly developing tensions as Russian troops amass on the outskirts of the former soviet republic. According to CNN, US intelligence has indicated that Russia is currently "clearly advancing their ability to invade." European Parliament President Roberta Metsola, US Secretary of State Antony Blinken, and British Prime Minister Boris Johnson each made statements supporting Ukraine on Monday as serious conflict threatens to break out in the immediate term.
Geopolitical conflicts, especially with respect to energy and energy security, lie at the heart of Russia’s impending invasion of Ukraine. Russia has been trying to use its hefty natural gas supply amidst the European energy crunch as leverage to strong-arm the European Union into greenlighting the Nord Stream 2 gas pipeline, which would allow the Kremlin to pump liquefied natural gas directly into Germany by way of the Baltic Sea, avoiding Ukraine entirely.
Although the construction of the pipeline is complete, it has not yet been greenlit to come online, as the project has faced major opposition in the west, where leaders including U.S. President Joe Biden have said that Nord Stream 2 will make the European continent energy insecure and dangerously dependent on Russia. On Monday, Ukrainian President Volodymyr Zelensky pleaded with the global community to provide the embattled nation with energy security guarantees in light of the “risks” to the local energy economy posed by Nord Stream 2, which he says poses “energy and security threats to us and to the region.”
While Ukraine’s economy, energy security, and sovereignty are under grave threat due to Russian political wrangling and military aggression, the Kremlin, too, could suffer under the weight of its own actions. Last week, Fatih Birol, the executive director of the International Energy Agency (IEA) warned that Putin’s threats to Ukraine could easily backfire and wreak havoc on the Russian economy. He cautioned that if current tensions continue to rise, we could see a “seismic” disruption to the EU energy market which would ultimately have “more consequences for Russia” than for any other involved state actor, as European nations would be forced to find new sources of energy.
“Failure to maintain [supplies] would shatter Russia’s reputation as a reliable partner and that would be a tectonic shift. Russia would be seen as a threat and that would have far-reaching consequences for European economies, but even more consequences for Russia. Europe would choose a strategy to diverge from Russia,” he was quoted by the Guardian.
In light of this uncertainty and the great risks posed on all sides by the pipeline and the potential invasion of Ukraine, the next two months will be “critical”, in Birol’s words, in seeing how Europe’s drawn-out energy crisis will continue to play out, and whether or not economic recovery or collapse is on the horizon. “Of course, we do not know what will happen if this political tension goes beyond being tension,” Birol continued. “I hope there will be dialogue, and that there will be no major geopolitical distortions.”
For now, although the situation at the border is dire and extremely precarious, Prime Minister Johnson and President Biden agreed in a phone call on Monday that “there remained a crucial window for diplomacy and for Russia to step back from its threats towards Ukraine," according to a Downing Street spokesperson, as reported by CNN. While world leaders remain hopeful about keeping the peace, the alternative is frightening, to say the least, and will have far broader implications than just disrupted energy markets. The recap of the phone call went on to say: “The leaders emphasized that any further incursion into Ukraine would result in a protracted crisis for Russia, with far reaching damage for both Russia and the world.”
By Haley Zaremba for Oilprice.com
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