Ukraine: It’s (mostly) about the energy

Ukraine is effectively two countries (if not more); the east looks towards Russia and the west looks towards Western Europe. The EU has been meddling in Ukraine for some time, encouraging application for EU membership but being coy about its response.

Russia also has a substantial interest in the future of Ukraine. There are various dynamics involved, but as the map below shows, Ukraine is an important distribution point for Russian gas. Most of the gas that is piped through Ukraine is distributed into the EU. 

Courtesy of East European Gas Analysis

The US is involved as it has strategic interests wherever there is energy.

Ukraine has its own gas fields, as shown in the map below. However there is another potentially game changing energy play in Ukraine – shale oil and gas. Leases were granted to Chevron late last year that will see USD350 million spent on exploration and up to USD10 billion on development. An agreement was also signed with Royal Dutch Shell in 2013. Exploration is at an early stage but initial results seem encouraging.

Courtesy of National Gas Union of Ukraine

Last Word

Developments in Ukraine are eerily reminiscent of the First World- War. That also involved energy, three great powers and an Eastern European flashpoint. Interesting times ahead for Ukraine.