Sunday, September 24, 2023

A Strategic energy area on the European continent

The factor that most shook the development of European energy policy in the short term was the conflict with Russia over the invasion of Ukraine and the associated instrumentalization of energy resources for geopolitical interests.

One of Russia’s responses to European sanctions has been to strangle the European economy, taking advantage of its high energy dependence on its exports (58% of the energy consumed in the Union is imported and 38% of its energy supply comes from Russia). . For this reason, since May 2021, the European Council has prioritized security of supply in the REPowerEU plan, seeking to ensure storage capacity, diversification of supply routes and accelerated development of new sources of consumption and energy production.

In this sense, the conflict on European soil has led both actors to seek new trading relationships and greater independence of their energy markets. And Ukraine has been one of the leading countries in implementing the European Union and Russia’s territorial strategies for this purpose.

Opportunity energy market

Ukraine has historically been the most important gas passage between Russia and Europe. This country supplies the European Union through a complex infrastructure network, which in 2020 reached the highest volume of flows from Russia to Europe.

In addition, the territory of Ukraine is one of the most important gas corridors in the world (with 38,600 km of gas pipelines and a distribution capacity of 142.5 billion m³/year). This country is the second largest country in continental Europe due to its surface area (603,548 km2) and one of the most populous states (with almost 42 million people, before displacement due to war). This country is the second largest country in continental Europe due to its surface area (603,548 km2) and one of the most populous states (with almost 42 million people, before displacement due to war).

Although there are now only a few active gas pipelines in Ukraine, the sabotage of NordStream has made gas flows to Central Europe partly dependent on gas pipelines that run through the conflict area.

When analyzing its resources, the Ukrainian territory also has three hydrocarbon basins (the western region of the Carpathians, the Dnieper-Donetsk in the north and east and the Black Sea around Crimea) with significant reserves of conventional and unconventional hydrocarbons. It is even sufficient for the exploitation and commercialization of a long list of mining resources (such as iron, uranium, lithium, etc.), mainly to China, Germany, Italy, Poland and Russia. Geologically, Ukraine ranks first in Europe and eighth in the world in anthracite reserves (mineral coal with the highest carbon content), reaching 3.5% of the world’s reserves (92.4% of which are in the Donetsk coalfield). On the other hand, lithium fields (of particular importance for the technology sector) are concentrated in Zaporizhia, Donetsk and Kirovohrad (Dobra region).

Ukraine is also an area with a diversified energy mix (coal provided 26.4% of the country’s energy needs, natural gas 27.5% and nuclear 23.1%, with strong development of renewable energy, of particular interest for the European Union’s sustainable goals ). . Ukraine also produces significant amounts of fossil fuels from its own territory (oil, coal and natural gas), although it has never been able to meet domestic needs. It is important to highlight that Ukraine also has one of the largest electricity grids on the European continent (where almost half of its capacity consists of thermal power plants, mainly from Donetsk coal, gas and mazut).

It is therefore noted that the eastern part of Ukraine (in which, due to the socio-political influence of Russia, the main areas affected by the conflict and historical dispute are located) is at the same time the part with the greatest energy wealth in the country and is responsible for ensuring the economic transit of is essential and territorial security of the region. It is therefore not surprising that Ukraine represents one of the largest current and potential energy markets.

A few weeks ago, at the Ambrosetti Economic Forum in northern Italy, President Zelensky said that Ukraine could become a “green energy hub” for Europe and help reduce its dependence on Russian gas. In this way, he openly expressed his commitment to transforming the country into an energy market of opportunity in response to the sustainable goals and European energy sovereignty.

Energy is the key to the business of war

Some of the countries involved in this conflict (mainly Europe, Russia and the United States) aim to exploit Ukraine’s energy opportunities and exploit its geographical location on the continent.

In addition to the ease of the Ukrainian territory to integrate an important network of gas infrastructure with Europe, it is worth noting that before the conflict that began in 2014, there were contracts for the prospection and exploitation of energy resources in the Black Sea, Crimea and other countries The Dnieper-Donetsk hydrocarbon basin was in the hands of the American oil company Exxon Mobile and the Dutch Royal Dutch Shell. Likewise, there have been European efforts to integrate Ukraine into its electricity market (the agreement was reached last March to ensure Ukraine’s electricity supply after it was decoupled from the Russian system to which it was historically linked). It is therefore not surprising that Russia also wants to compete with these European electricity connections.

In short, it is noted that the key to influence in this conflict scenario in Ukraine lies primarily in the ability to access, exploit and control energy resources (to respond to high consumption needs and ensure Russia’s energy independence). Expansion of the infrastructure network and sources of supply, increasing energy reserves and competitiveness of energy prices (main topic of debate between global energy production and supply centers such as OPEC), ensuring market dominance.

Nation World News Desk
Nation World News Desk
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