CLASH OF TITANS: Energy as a key factor in the Ukrainian economic clash

lunedì 15 dicembre 2014

Energy as a key factor in the Ukrainian economic clash

“Who controls the food supply controls the people; who controls the energy can control whole continents; who controls money can control the world.”
Henry Kissinger

The civil war in Ukraine clearly has become one of the most controversial International affairs, not only for the victims and the clash between USA, EU and Russia, but also for the strategic position of Ukraine. In fact the pipeline that brings gas from Russia to Europe passes through the Ukrainian territory and so the war has been transformed also in an energy clash.

It is useful to note that Russian gas is essential for Ukraine and European countries have a significant dependence on it: EU gets 24% of its gas from Russia and a half of that comes from Ukrainian pipeline[1]. This explains the reason why Russia was so self confident at the beginning of the conflict and EU simultaneously was not so determined to apply economic sanctions to Russia. Nevertheless a help to Europe came from the USA that offered to cover the amount of gas that could be cut down by Russia. This large amount of American gas was disposable thanks to the fracking technique that permits to extract natural gas that was unreachable in the past. The answer of Russia consisted in signing a historical International agreement: a 400$ billion gas deal with China. In this way Russia has enforced its geopolitical position and has found an alternative to European market.

On November 28 2014 OPEC decided not to cut production

At this point the energy clash seemed to be concluded with no winners, but Russia surprisingly started having bigger problems than EU in this field. The price of natural gas and oil recently is going down and the producing countries have decided not to decrease the extraction of natural resources in order to raise prices. As a consequence of this decision, nations that import gas and oil, like European countries and China, took advantage of the situation. On the contrary the Russian economic condition is weakening because of the lower prices of gas and oil, the sanctions imposed by western countries and the high military expenses: the ruble is depreciating dramatically and inflation rate is accelerating.

From what was said, it seems that Russia is losing the energy clash in the context of Ukrainian war. However it is fundamental to remind the determination of Putin and the frailty of EU that is under pressure for the economic crisis and for the anti-European feeling that is growing among the citizens of member states.

References:

http://www.economist.com/news/briefing/21600111-reducing-europes-dependence-russian-gas-possiblebut-it-will-take-time-money-and-sustained

http://www.nytimes.com/2014/05/22/world/asia/china-russia-gas-deal.html?module=Search&mabReward=relbias%3Aw%2C{%222%22%3A%22RI%3A16%22}

http://ricerca.repubblica.it/repubblica/archivio/repubblica/2014/12/02/putin-alla-guerra-dellenergia31.html?ref=search

http://www.ilsole24ore.com/art/notizie/2014-12-04/rublo-picchiata-senza-freni-063742.shtml?uuid=AB3b0uLC

[1] 2012 data by Eurogas

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A brief introduction

The political-diplomatic clashes

Are International politics always headed for growing State power in a background of “all against all” war? We obviously hope that they are not. In fact in theory International politics and diplomacy can be done for peaceful purposes or in order to improve a State condition not at the expenses of another. Nevertheless alliances or a particular geopolitical strategy also are implemented in order to isolate or to take position against a State or a group of States. An historical example about that are the attempts of Germany to isolate France through a system of alliances at the end of XIX century. In addition Germany drew up an alliance with Austria-Hungary and Italy in 1882. In 1907 the answer to the will of power of Germany by France, UK and Russia was the creation of the Triple Entente that took position against the Triple Alliance.

The economic clashes

As mentioned, the clash between states can also be played on the level of economic relations. One of the leading interpreters of this policy is certainly Germany that has often led the fight on the level of economic relations: the historical periods in which it has been most evident were the '80s with the creation of the European Monetary System (E.M.S.) and in recent years with the rise of the single currency, the Euro. The E.M.S. was a monetary mechanism that forced states parties to align their currency exchange rates. It favored the German power because its currency was strong and penalized its exports in favor of states, such as Italy, which had a weak currency, and if needed, they could also devalue to encourage exports. This situation has generated strong international tensions between state parties and led to a rapid dismantling.

The cultural clashes

In a background of power politics, a state who wants to use its cultural authority has the goal to expand its sphere of influence to impose its hegemony to another civilization, not in a military but cultural way. The cultural clashes are therefore conflicts between states with different cultures and different civilizations.
The Cold War was a perfect example of this policy: the two blocks in opposition represented two very different civilizations, who preached the supremacy over the other. The creation of the Warsaw Pact and the NATO arose from the need to tie closely the states who were more similar to their own idea of civilization.