Can Crimea survive without Ukraine's power?
Crimeans voted overwhelmingly to secede from Ukraine in a controversial referendum Sunday, but the peninsula is largely dependent on Ukraine for its power and natural gas. Moscow might be willing to change that, if it means access to the Black Sea's significant oil and gas resources.
Crimea, like broader Ukraine, is divided between political ambitions and economic realities.
Annexing the Ukrainian peninsula would be a political and cultural victory for Russian President Vladimir Putin, and it would also give Moscow more direct access to the Black Sea's oil and gas resources. Crimeans appear eager to go along with the plan, but are hamstrung by their reliance on the rest of Ukraine for its gas and electricity. Recent developments suggest a smaller natural-gas battle is brewing within broader tensions over Russia's role in European energy.
Russian troops seized control of a natural gas terminal just beyond the Crimean border Saturday, as reported by The New York Times. On Sunday, Crimeans voted overwhelmingly in favor of joining Russia in a controversial referendum. A day later, Crimea's parliament voted to nationalize the region's main energy companies, which many saw as a land-grab that would ultimately cede control of Ukraine's offshore oil and gas future to Russia.
That move creates "a new set of legal problems," according to Mikhail Korchemkin, founder of East European Gas Analysis, a Pennsylvania-based consulting firm.
"Offshore development requires significant investment, but Crimea is very likely to be cut off from international financing," Mr. Korchemkin writes in an e-mail. "There will be no money to drill for oil and gas."
US oil supermajor ExxonMobil has already announced it has put on hold its plans to invest in developing Ukraine's offshore resources. Other Western companies have expressed interest in the region, but are unlikely to pursue investments for fear of sanctions from the United States and European Union.
The shelf of the Black Sea (together with the Sea of Azov) are expected to contain about 57 trillion cubic feet of gas, according to the government's estimates. That accounts for nearly half of Ukraine's forecast gas reserves, but the regions are underdeveloped and require billions of dollars in new investments. Russia's state-owned gas company Gazprom could change that, should Crimea successfully secede from Ukraine.
Structural realities complicate a plan to shift Black Sea oil and gas under Russia's auspices. All of Crimea's bridges, power transmission lines, and gas pipelines enter the peninsula from Ukraine, which means Russia would have to construct new supply routes to take advantage of Crimean support and energy resources. It also means that continental Ukraine has a fair amount of leverage in dealing with Crimea.
Crimea imports more than 80 percent of the consumed energy from the continental part of Ukraine, according to the Crimean government. The peninsula is more self-reliant when it comes to natural gas – producing about two-thirds of it domestically and importing the rest from Ukraine. Crimean officials said the seizure of the gas terminal Saturday was in response to alleged threats of supply disruption from Kiev, according to The Moscow Times.
Ukraine stepped up security measures Monday, deploying security forces to guard key natural-gas infrastructure.
“The National Guard and Security Service of Ukraine have put in place special protective measures concerning the gas transmission and distribution system of Ukraine,” Ukrainian officials said Monday, as reported by RIA Novosti, a state-owned Russian news agency. “This decision was made to ensure the safety and smooth operation of critical infrastructure in the country.”