Offshore motive for the occupation of Ukraine’s Crimea

Mykhailo Gonchar
President
CGS Strategy XXI
Ukraine

Chief Editor
Black Sea Security Journal
Ukraine

The renewed Russian military invasion of Ukraine on Feb 24, 2022 goes along with the war on the sea. The activity of Russia`s fleet poses a threat not only to Ukraine, but also to other neighboring countries bordering the Black Sea. In particular, this concerns offshore gas exploration projects. Minelaying in the north-western sector of the Black Sea is aimed at blockage of the Ukrainian ports. Another threat is that mines drift towards the Bosphorus through the Romanian, Bulgarian and Turkish sectors, where the offshore exploration by investors takes place.

The most extensive offshore exploration took place in the Ukrainian sector. The first Production Sharing Agreements (PSA) were signed between the Ukrainian Government and companies from the US and the EU at the beginning of 2010`s. One of them related to the Black Sea shelf. The development of the Ukrainian Black Sea sector could fully provide country’s demand for natural gas. Ukraine was estimated to possess natural gas reserves around 2.3 trillion cubic meters. A consortium comprising ExxonMobil, Royal Dutch Shell, OMV Petrom has won a tender on extraction of hydrocarbons within the Scythian gas area in the Black Sea.

According to American IHS CERA forecast made in 2012, by 2030 Ukraine`s gas production could have surpassed (!) 70 bcm annually. This is comparable to gas production of all EU member-states. In such circumstances, this domestic gas production could not only have met Ukraine`s needs, but also be exported to the neighboring EU countries, displacing Russian gas.

American forecast regarding Ukraine`s prospects to increase gas production as well as strong international consortium and purchase of two modern drilling rigs by Naftogaz in Singapore have not gone unnoticed in Russia. Moscow considered that such scenario could lead to the loss of the Ukrainian market for Gazprom, which additionally may lose its EU market share.

The occupation of the Crimean Peninsula and exclusive economic zone of Ukraine gave Russia an opportunity to put an end to ambitious gas development projects of American and European investors in the Black Sea region and simultaneously displace western competitors to Russian state companies. This has also made Ukraine`s access to the majority of offshore gas fields impossible.

Captured in March 2014 Ukrainian extraction platforms and drilling rigs still remain under Russian control. The illegal economic activity on the Ukraine shelf is covered-up by the efforts of the Russian Black Sea Fleet and missile boats of the FSB Coast Guard. The drilling rigs are under constant guard of Russian Special Forces and Navy.

Russians illegally extract gas. They have already extracted about 15 bcm in the offshore gas fields since the occupation. Ukraine has respectively appealed to the international judicial institutions.

Despite the difficult security situation in the north-western sector of the Black Sea, the Ukrainian government has made an attempt to continue exploration and attract investors to offshore projects. Taking into account high military and political risks, it was difficult to hope for serious foreign investments. Consequently, in 2020 Naftogaz of Ukraine received permission for exploration and production. However, the new wave of Russian aggression undermines these plans to develop offshore fields.

In August 2020, Turkey announced discovery of the largest-ever Black Sea gas field Tuna-1. If Turkey manages to put it into operation in 2023, the country will be able to slash Russian gas imports. The Russian Federation will make every effort to not allow success of Ukrainian offshore projects and complicate offshore gas extraction in Turkey and Romania. Creating unacceptable military risks for investors – one of the reasons why Russia is intensifying the militarization of the Black Sea.

Another reason for further militarization is the protection of Russia’s energy and transport infrastructure, which is allegedly under threat coming from Ukraine, the U.S. and NATO. The pipelines Blue Stream, TurkStream, underwater energy bridge and gas pipeline from Russian Taman to Ukrainian Kerch as well as the bridge across the Kerch Strait are meant.

The conclusion, made by the Center for Global Studies Strategy XXI and Center for Defense Strategies within the joint project aimed at assistance to the Crimea Platform, is that with militarization of Crimea and the Black Sea, Russia tries to transform it into the ‘Russian lake’ and displace NATO and the EU from it.

In order to counteract Russia`s military plans, it is necessary to create A2/AD in north-west sector of the Black Sea from Constanta (Romania) to Skadovsk (Ukraine). NATO should increase its military presence in the Black Sea, first of all the U.S. and the UK, providing naval and air patrols from the Bosphorus to Constanta, Odesa and Ochakiv.

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