Tuesday, May 6, 2014

Ukraine: Who Will Control Eurasia's Oil and Gas?


President Barack Obama pictured with Russian President Vladmir Putin in Ireland last June. (photo: Evan Vucci/AP)
President Barack Obama pictured with Russian President Vladmir Putin in Ireland last June. (photo: Evan Vucci/AP)

By Steve Weissman, Reader Supported News
05 May 14

ladimir Putin annexed Crimea. Barack Obama and his European allies organized the coup in Kiev. Both actions violated international law. Both intruded massively in the internal affairs of a sovereign state. Yet, most commentators limit their concern, loudly condemning one crime while silently ignoring the other. It cuts both ways, though Western academics are the worst, dismissing any idea that the US and Europe stage-managed the putsch. That, they insist, is a figment of Putin’s twisted imagination. Would that it were!
Russian propagandists and their useful idiots conjure up their own crock. They take a real problem – the role of neo-Nazis and ultra-nationalists on the other side – and exaggerate it beyond anything the evidence supports. It’s called crying wolf. It discredits honest reporting of neo-Nazi and ultra-nationalist activity. And it will grow more flagrant as Eastern Ukraine moves toward full-scale civil war with the likely intrusion of Russian “peace-keepers.”
Willful blindness, crying wolf, and double standards all seem par for the course. It’s much like the intellectual Iron Curtain of earlier years when Stalinists lived in one reality, conservatives and cold war liberals in another. Everyone now knows that the great divide no longer reflects an ideological conflict between capitalism and communism, but few have faced up to the new reality. The conflict has gone more primal, the high-minded pretensions less persuasive. The world’s sole hyper-power still has game. And, contrary to conventional wisdom, the moving force is not Putin’s tactical genius (or home-court advantage) but the audacity of Washington’s strategic game plan, which US ambassador Geoffrey Pyatt let slip when he first arrived in Kiev last September.
“Ukraine is in a fantastic position,” the American diplomat and covert warrior told the country’s pro-Western newspaper Day in early September. “[It] has a border with four EU member states. It has the opportunity to become the eastern frontier of a large European economic space at the same time as it serves as Europe’s gateway to the Eurasian heartland and Europe’s gateway to one of the most dynamic economic regions of the world which stretches all the way to Shanghai and Vladivostok.”
Pyatt was not just moving his lips. He had said much the same on Ukrainian television the week before. In plain English, he and his superiors in Washington see Ukraine as key to dominating the resource-laden land mass of Eurasia – not just the cluster of oil rich states on the southern border of the former Soviet Union, but the entire “World Island” from Western Europe to Eastern Asia. At the close of World War I, the British geographer and geostrategist Sir Halford John Mackinder had spelled out the logic in more elegant terms. “Who rules East Europe commands the Heartland,” he wrote. “Who rules the Heartland commands the World Island. Who rules the World Island commands the World.”
Pyatt’s talking points echoed Mackinder’s most active intellectual heir, former US national security adviser Zbigniew Brzezinski. “Eurasia is home to most of the world’s politically assertive and dynamic states,” Brzezinski
wrote in 1997 in the influential journal Foreign Affairs. All the historical pretenders to global power originated in Eurasia. The world’s most populous aspirants to regional hegemony, China and India, are in Eurasia, as are all the potential political or economic challengers to American primacy. After the United States, the next six largest economies and military spenders are there, as are all but one of the world's overt nuclear powers, and all but one of the covert ones. Eurasia accounts for 75 percent of the world’s populations, 60 percent of its GNP, and 75 percent of its energy resources. Collectively, Eurasia’s potential power overshadows even America’s.”
In Foreign Affairs and his book the same year, “The Grand Chessboard,” Brzezinski urged nothing less than “a benign American hegemony” over Eurasia, one that would impede the rise of any rival, whether Russia, China, or some coalition of Islamic or other nations. This was Brzezinski’s path to “American global primacy,” and it started with more NATO and more Europe. “NATO entrenches American political influence and military power on the Eurasian mainland,” he wrote. “A wider Europe and an enlarged NATO will serve the short-term and longer-term interests of U.S. policy.”
As the evidence now shows, President George H.W. Bush and German chancellor Helmut Kohl hoodwinked Mikhail Gorbachev and never ended the Cold War containment of Russia. “The Soviet threat” lost any remaining reality, and in time Brzezinski’s vision of Eurasia took its place, encouraging the eastward expansion of NATO and its troubled stable-mate the European Union. The stakes could not have been higher. Washington – not Moscow or Beijing – would dominate the World Island and its enormous flow of oil and gas, while the European allies would either play second fiddle or – to borrow from US assistant secretary of state for European and Eurasian affairs Victoria Nuland – “Fuck the EU.
This is the big untold story – much bigger than whatever Putin or Obama do next. Or whether Cold War rhetoric and nuclear rivalries persist. Or how much austerity the IMF imposes. Or how corrupt the Ukrainian and Russian oligarchs remain. Or what becomes of various oil and gas pipelines or of hydraulically fractionated shale gas, whether from the United States or within whatever borders Ukraine can maintain. These are all vital stories to tell, as RSN will continue to do. But they are only stepping stones, stumbling blocks, or sidebars in the grand strategy that Washington is pursuing – and from which it will not step back without a fight.
Ignoring all this or taking American hegemony as the way things are supposed to be, modern Kremlinologists justify recent Western actions in Ukraine as a needed response to Putin’s own Eurasian customs union and whatever fantasies he may have of recreating the Soviet Union or old Czarist Empire. What shoddy scholarship! Whether as geostrategy or economics, Putin’s ambitions pale in light of Washington’s effort to establish primacy over Eurasia and beyond.
Eurasian Dreams
With such grand ideas on his lips when he arrived in Kiev, Ambassador Pyatt set out to help Ukraine’s legally elected, if massively corrupt, President Viktor Yanukovych “walk through the door that Europe is holding open.” This was Pyatt’s top priority, he repeatedly told reporters. At the time, Russia was raising tariffs on selected Ukrainian goods as a warning of what could happen if the country moved closer to the EU. But when threats failed to scare Yanukovych, the geo-savvy Putin offered the nearly bankrupt Ukraine short-term relief – some $15 billion plus a 30-33% discount on its natural gas. With the penny-pinching Europeans and their American ally promising little upfront cash and demanding too many concessions, Yanukovych leaned toward Putin in what Der Spiegel called “a marriage of convenience, not a marriage of love.”
This was crime enough. As documented here and here, Washington and its European allies had spent many years and billions of dollars in Ukraine building up the “civil society” opposition that took to the streets in the Maidan protests. Nonviolent at first, they tried to pressure Yanukovych back toward the EU. Failing that, they overthrew him with the Molotov cocktails of neo-Nazi and ultra-nationalist street-fighters and the inside help of disgruntled oligarchs who had previously backed him. The protesters and their Western backers then replaced Yanukovych with the current right-wing nationalist government, led by Prime Minister Arseniy Yatsenyuk, America’s man “Yats.” No surprise, the original ambitions remain in play, as Washington continues to use Ukraine in an attempt to establish hegemony over Eurasia.
Pyatt laid it out from the start, though in modest terms. “My second priority,” he announced last summer, “is to support Ukraine’s aspiration to achieve greater energy independence.” He spoke of independence from Russia and its largest company Gazprom, the corrupt oil, gas, construction, media, and banking conglomerate that the Kremlin half-owns and controls and to which the equally corrupt Ukraine still owes billions of dollars. Pyatt suggested instead dependence on predominantly American oil giants, all privately owned but working in concert with the US Department of State. With so much at stake, words like “independence” take on an Orwellian twist, as do “freedom,” “democracy,” and “civil society.”
Pyatt talked specifically about ExxonMobil and Chevron, praising their plans to invest in developing Ukraine’s shale gas reserves. “They want to bring the best of American technology, American know-how and American capital to the Ukrainian energy sector,” he said. Pyatt reminded reporters that one of Chevron’s former corporate directors, US secretary of state Condoleezza Rice, had negotiated America’s “Strategic Partnership” with Ukraine. This is an ongoing forum with trips to the US that Washington used to help persuade local officials to overcome widespread fears that the intended “fracking” of shale gas reserves would endanger water supplies, increase earthquakes, and create other environmental disasters.
“I think the US experience with non-conventional gas is very important for the decisions that Ukraine will have to make,” Pyatt told Day. “This has been a game changer in the United States. It has helped us to achieve greater energy independence. It has helped to drive employment in the United States. It has helped to improve the competitiveness of American companies. I am very optimistic that these new energy plays in Ukraine have the potential to do some of the same, which would be good for America, but it will also be very good for Ukraine and it will be particularly good for the communities that host these resources.”
What a salesman! On November 5, in the presence of Pyatt and oil company executives, President Yanukovych and his government announced a production sharing agreement with Chevron. The deal would extend for 50 years and bring a total investment as high as $10 billion. Chevron would begin with some $350 million to explore for shale gas over two to three years in Western Ukraine’s Olesska region, part of a band of shale that stretches from the Baltic to the Black Sea. According to the International Business Times, Washington supported the agreement “as part of its national security strategy to help reduce Russia’s hold on Europe and Kiev.”
Yanukovych had signed a similar agreement with Royal Dutch Shell in January 2013 to cover exploration at Yuzivska in eastern Ukraine. He was hoping, he said, “to have full sufficiency in gas by 2020,” and if the explorations went well, to export energy without having to worry about Russia.
As far back as August, Pyatt had offered American aid to improve Ukraine’s energy efficiency and allow the country to use its extensive network of gas pipelines to Europe to reverse the flow should the Russians cut off supplies as they did in 2006 and 2009. Vice President Biden talked the same talk on his recent trip to Kiev, and an interagency team of American experts has been trying to make it happen.
Keeping Europe on a Leash
For many EU leaders, the fight for Ukraine caps their long crusade to build a Europe “full and free.” For leaders of Poland and Sweden, the fight builds on centuries of shared history and holds out the hope of creating an economic and political counterforce to Germany’s overwhelming power within Europe. For Washington, it’s all a bit different. Pursuing primacy in Eurasia requires “a benign American hegemony” over America’s European and NATO allies as well, and that means keeping them from getting too close to Moscow.
During the Cold War, German chancellor Willy Brandt worked to create closer relations with East Germany, Eastern European members of the Soviet Bloc, and the Soviet Union itself. He called it his “ostpolitik,” and it created tensions with the US. More recently, some in Washington feared that Chancellor Angela Merkel was pursuing an independent “ostpolitik” of her own, which could have supplied a motive for listening to her telephone calls.
In a less political way, Germany and other countries in Europe have now developed a strong economic relationship with the post-Communist Russians, who have become a major market for exports, a large supplier of oil and natural gas, owners of domestic pipelines and other energy facilities, and even sponsors of German football teams. Gazprom, for example, supplies 30% of Europe’s natural gas, and for some countries – Finland and Slovakia – the figure reaches 100%. According to Der Spiegel, Gazprom’s customers find the company a reliable supplier, which does not make Washington any happier. Much as Ambassador Pyatt urged Ukraine to reduce its dependence on Russian oil and gas, Washington has long been among the loudest voices urging Europeans to do the same. Moscow, warn the Americans, will use the threat of shutting off Europe’s energy to hold it hostage to political demands.
The one case the Americans always cite concerns Ukraine, though the evidence is far from conclusive. Pipelines crossing Ukraine deliver much of Gazprom’s gas to the rest of Europe, and the company also has some of its largest storage facilities in the county. This Ukrainian connection has twice caused major problems for Europe.
In January 2006 and January 2009, the heart of winter, Gazprom shut down shipments to Ukraine as part of billing and contract disputes. According to industry experts, Ukrainian leaders then conspired with local oligarchs to syphon off the gas meant for Europe, leaving the Europeans with insufficient heat and power. Gazprom has since begun construction of major new pipelines that will bypass Ukraine. But last month, Putin warned that Europe could again suffer similar shortages this coming winter if the Ukrainians – or their European backers – refuse to make regular payments for current deliveries and back payments of $2.2 billion dollars or more that Ukraine owes Gazprom for past purchases.
“The situation with gas transit to the EU is serious,” explained Russian energy minister Alexander Novak. "It's possible that there will be disruptions in gas deliveries."
"We have no other interest other than fulfilling our commitments,” added Gazprom’s deputy CEO Alexander Medvedev. “We are heavily dependent on revenues from Europe. It then becomes a question of whether Ukraine will comply with the transit contract and deliver the gas to the border of Ukraine or would they steal gas from the export pipe?"
Are the Russians resorting to political extortion? Or is Gazprom simply doing what any business would do, refusing to deliver the goods until the deadbeat customer pays?
A bit of both, I think. But the questions will now create major nightmares for Ukraine, Europe, and their “benevolent overlords” in Washington. Such are the burdens of pursuing American hegemony across Eurasia.


A veteran of the Berkeley Free Speech Movement and the New Left monthly Ramparts, Steve Weissman lived for many years in London, working as a magazine writer and television producer. He now lives and works in France, where he is researching a new book, "Big Money and the Corporate State: How Global Banks, Corporations, and Speculators Rule and How to Nonviolently Break Their Hold."
Reader Supported News is the Publication of Origin for this work. Permission to republish is freely granted with credit and a link back to Reader Supported News.
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