Such a move would allow Moscow – which already controls Ukraine’s grain exports – to dominate much of the country’s vast energy reserves as well. Peace talks to end the three-month war remain stalled, despite mounting pressure from some western corners.
Although Ukraine’s untapped gas was not the primary motive for the February 24 invasion, denying it to Ukraine is an important part of “Putin’s all-out economic war with Ukraine.”
Ukraine has a potential 5.4 trillion cubic meters of untapped natural gas reserves – even the confirmed reserves of 1.9 tcm are the second largest in Europe after Norway.
Most of it is east of the Dnipro River, with slices in Kharkiv and Poltava oblasts, as well as the Black Sea and Azov regions, including Crimea.
“Peace talks are dead, neither side can risk giving the impression that they are not interested in a diplomatic resolution, nor give the other what they are asking for political reasons” , said Professor Mark Galeotti of the Council on Geostrategy think tank.
“In the meantime, Russia is pursuing an all-out economic war. They seek to crush Ukraine.
“Look at the Black Sea blockade – Russia didn’t start the war to steal Ukraine’s wheat, but they would rather take it than allow the Ukrainians to market it.”
One of President Volodymr Zelensky’s main promises in 2019 was to “clean up” Ukraine’s corrupt energy sector and bring the country to energy self-sufficiency by increasing production of natural gas, biogas, hydrogen and biomethane – eliminating dependence on Russian imports.
As a net exporter, it would somehow replace Russia as a gas supplier to the EU, which is expected to import around 90% of its gas needs by 2030.
Lacking the financial capital and technical expertise to extract fossil fuels, Ukraine was beginning to turn to Western oil companies.
The Russian invasions put an end to it.
All of this risks accelerating the prospect that the West will tire of bailing out Ukraine, Professor Galeotti warned.
“Russia knows that the more perilous Ukraine’s economic position becomes, the more it must demand and depend on Western financial assistance.
“If you can raise the price for the West, that’s a big plus.”
Rifts have already emerged between frontline EU member states in Eastern Europe and the Baltic, and Western industrial giants Germany, France and Italy.
Foreign Secretary Liz Truss was forced last week to urge her allies not to ease off the accelerator now by appeasing Russian aggression.
His comments, in Bosnia and Herzegovina, followed a high-profile intervention by former US Secretary of Defense Henry Kissinger, who became the latest public figure to warn of Russia’s marginalization, calling on the Ukraine to accept its territorial losses from the 2014 war in order to end hostilities.
In France, President Emmanuel Macron is continuing talks with Putin, with French diplomats privately declaring growing impatience with the scale of the economic sacrifices – particularly on energy sanctions and the refugee issue.
Italian energy conglomerate ENI has become the first in Europe to formally enter into a ruble deal for Russian gas.
And, while it will ban oil imports, Germany has followed Italy’s lead with gas, using EU guidelines to avoid breaking sanction rules.
Last week, German Chancellor Olaf Scholz was accused by Polish Prime Minister Andrzej Duda of breaking his promise to send modern tanks to replace those Poland had donated to Ukraine.
“We had a promise. We hear that Germany is not willing to fulfill it,” Duda said.
This malaise could affect Ukraine’s post-war reconstruction, the cost of which is estimated at one trillion pounds.
Although the US recently approved a £40bn package, half of that will go to military equipment.
And recent calls by the Baltic states to use £300bn of frozen Russian assets are seen as legally unworkable.
“The only way forward is a second Marshall Plan, but that partly depends on the nature of any settlement. If the conflict freezes now, what will prevent it from erupting again? Investors will be tired,” said Ed Johnson of strategic risk group Sibylline.
“Putin is banking on the West being distracted or bored by Ukraine, or economically unwilling to help.
“And political fatigue is a real risk. Billions have been spent fighting the Covid pandemic, and that kind of spending is not sustainable.”
He added: “In the meantime, entire factories are being sent back to Russia and retooled and advanced agricultural equipment is being stolen – all to leave an economic black hole.
“If things don’t change, Ukraine’s prime agricultural land will disappear, as will access to ports and energy reserves.”