Russia’s Energy Wars with Ukraine

From Politics and Economics to Missiles and UAVs

Ivan Sichen

Since the beginning of the full-scale invasion of Ukraine, the Russian Federation has carried out nine waves of large-scale missile attacks on our country’s energy infrastructure. 25 thermal power plants, seven hydroelectric power plants, and two renewable energy facilities were damaged. More than 100 strikes were made on electricity distribution and transmission facilities. The air attacks with missiles and UAVs are a continuation of Russia’s energy wars against Ukraine, which began in the 1990s and are being waged by all methods, including military ones. At this, the Kremlin’s intentions remain unchanged and include undermining Ukraine’s economy and provoking a social crisis in Ukraine, as well as forcing Kyiv to make concessions on issues important to Moscow. Currently, the Kremlin is trying to force Ukraine to agree to Russian conditions for “freezing” the war. However, as in the past, so now, Ukraine is disrupting the Kremlin’s plans. Therefore, let’s take a closer look at Ukraine’s experience of countering the energy wars unleashed by Russia.

Nowadays Russian Federation began using the energy leverage to implement its foreign policy immediately after the collapse of the USSR. First of all, this concerned Ukraine, which the Kremlin assigns a special place in its plans to restore the semblance of the former Soviet Union, as it was completely dependent on Russian energy carriers. In addition, in the early 1990s, Ukraine had no concrete mechanisms to diversify its sources of oil and gas supplies, and the government and private business did nothing to remedy the situation. This gave the Kremlin powerful leverage over Ukraine, and it actively used it. At that time, Russia actually forced Ukraine to abandon its European course and declare a non-aligned status. In practice, this meant that Ukraine was not only turning into a “gray zone” between the West and Russia, but would also be completely dependent on it. As a result, Russia had the opportunity to increase its influence on the Ukrainian economy and resolve other issues in bilateral relations in its favor.

In particular, in March 1995, the Russian government-controlled Gazprom accused Ukraine of non-payment of gas debts and threatened to cut off gas supplies. To resolve the situation, the Russians offered to transfer to Gazprom part of the property rights to the Ukrainian gas transportation system (GTS). However, Kyiv did not agree to that, offering to agree on a debt repayment schedule. It should be noted that Ukraine skillfully used to its advantage the fact that Russia was dependent on the Ukrainian GTS for gas transit to Europe and therefore could not completely cut off gas supplies. Subsequently, Ukraine’s leading role in the transit of Russian gas became its strongest argument in negotiations with Russia on all gas disputes.

Nevertheless, in 1997, Russia manipulated the issues of gas prices and Ukraine’s debts to obtain favorable conditions for the division of the Black Sea Fleet and its basing in Crimea. Thus, the Russians received the right to use Sevastopol bays, and the rent was partially covered by Ukraine’s gas debt. In addition, Kyiv transferred to Russia most of the Black Sea Fleet ships that were supposed to belong to Ukraine.

In 1999, again at the expense of debts, Ukraine transferred to Russia eight Tu-160 and three Tu-95MS, as well as 19 Tu-22 strategic bombers that it had received when the Black Sea Fleet was divided. Along with them, Russia received 575 X-55 cruise missiles and spare aircraft engines. The Kremlin is now using those weapons in the Russian-Ukrainian war, including to strike Ukraine’s energy infrastructure.

Since 2005, after the victory of the Orange Revolution and Ukraine’s clear course to join the EU and NATO, Russia’s energy wars have reached a qualitatively new level. The most resonant was Russia’s provocation of gas conflicts with Ukraine in the winter of 2005–2006 and 2008–2009. In this way, the Kremlin sought to influence the process of Ukraine’s rapprochement with the West, destabilize the socio-political situation in Ukraine and damage the Ukrainian economy. The Kremlin also tried to influence the results of the next presidential election in Ukraine.

Thus, in March 2005, Russian Gazprom, but in fact the Russian government, demanded that Ukraine pay for gas at a price close to the European one — $250 per thousand cubic meters. After Kyiv refused, Gazprom stopped supplying gas to Ukraine on January 1, 2006. Besides, Russia immediately accused Ukraine of “unauthorized diversion of gas intended for Europe”.

However, Russia was still dependent on the Ukrainian gas transportation system, and therefore was forced to make certain compromises with Ukraine. On January 4, 2006, the parties signed an agreement that ended the practice of barter trade and separated gas supply and transit. The gas price was set at $95 per thousand cubic meters, which was made possible by mixing Russian gas for $230 and Turkmen gas for $44.

In fact, the agreements were a victory for Ukraine, which retained the ability to receive gas at relatively affordable prices and continue its European course. At this, Ukraine began to develop sources of energy supplies alternative to Russian ones. The possibility of shale gas extraction on Ukrainian territory was also considered.

At those times, Europe, dependent on Russian oil and gas, was exposed to Russian energy provocations. This was one of the main reasons for the refusal to grant Ukraine the NATO’s Membership Action Plan in 2008. The definition of clear prospects for Ukraine’s membership in the European Union was also “frozen”. In addition, Ukraine’s efforts to diversify gas supplies were not supported. In Moscow, this position of the West was perceived as its “weakness” and “consent to Ukraine’s return to Russia’s sphere of influence”. Therefore, Moscow increased pressure on Ukraine on the above-mentioned issues using the energy leverage. At this, Russia used to its advantage the political crisis in Ukraine, which arose as a result of sharpening disagreements between President Viktor Yushchenko and Prime Minister Yulia Tymoshenko.

In December 2008, Russia made claims related to the $2.4 billion debt owed by the intermediary company RosUkrEnergo to Gazprom and demanded repayment of the debt. Otherwise, Moscow threatened to refuse to sign a gas supply agreement with Ukraine in 2009. Ukraine disagreed with those claims and stopped negotiations. In turn, Russia announced an increase in the price of gas for Ukraine to $450 per thousand cubic meters (as for other Central and Eastern European countries), and on January 1, 2009, it stopped supplying gas to Ukraine altogether.

The cessation of gas supplies created critical problems for the Ukrainian economy. Gas supplies to Central and Eastern European countries were significantly reduced. Under these circumstances, the EU leadership demanded that Russia and Ukraine immediately reach an agreement and resume gas transit to Europe. In fact, those EU demands included Russia’s resumption of gas supplies to Ukraine.

Given Russia’s being interested in maintaining cooperation with the EU as the main source of its foreign exchange earnings and Ukraine’s urgent need for gas, a gas supply agreement was signed in 2009, albeit on rather unfavorable terms for Ukraine. The document enshrined Gazprom’s monopoly on the Ukrainian market, and the price for gas was set at $450 per thousand cubic meters. However, taking into account a 20 % discount and the cost of transit of Russian gas to Europe, the average price was $232, which was still unfavorable for our country.

Besides, gas conflicts provoked by Russia led to significant negative political consequences for Ukraine. Thus, they have become a significant addition to Russia’s information activities aimed at undermining stability in Ukraine, splitting Ukrainian society and discrediting the national democratic leadership of our country. As a result, the presidential election in Ukraine in 2009 was won by Moscow’s protege Viktor Yanukovych. As we recall, he completely reoriented Ukraine’s foreign policy toward Russia and gave it access to all key sectors of the Ukrainian economy. In exchange, Moscow granted the Yanukovych regime certain energy preferences, including lower gas prices and the ability to receive gas on credit.

At the same time, Russia continued to try to establish its control over the Ukrainian gas transportation system. However, it again could not do so because of the business interests of Yanukovych and his “clan”. Therefore, Moscow resumed pressure on Kyiv and began building new gas pipelines bypassing Ukraine. The main one was the Nord Stream pipeline, which connected Russia with Germany under the Baltic Sea. In this way, Russia was trying to exclude the Ukrainian GTS from the system of transit of Russian gas to Europe, which would allow it to get rid of its dependence on Ukraine, deprive our country of revenues from the transit of Russian gas, and gain additional leverage over both Ukraine and Europe.

The situation and the nature of Russian energy wars have undergone qualitatively new changes after the Revolution of Dignity in Ukraine and Russia’s attack on our country in February 2014. Thus, along with Crimea and part of the Donbas, Russia seized the facilities of Chornomornaftogaz, oil and gas fields on the Crimean shelf, as well as energy infrastructure facilities in Crimea and in the East of Ukraine. At the same time, Russia raised the price of gas for Ukraine to $485 per thousand cubic meters and made further claims about Ukraine’s gas debts, threatening to cut off gas supplies. This became subject to EU-mediated negotiations between Ukraine and Russia, as well as the reason for mutual lawsuits in international courts. However, no practical results were achieved that would satisfy Ukraine. Nor did the USA and EU sanctions imposed on Russia’s energy sector have tangible effect. Moreover, in order to influence Kyiv and Brussels, Russian Gazprom reduced gas supplies to Ukraine and Europe. Eventually, this problem was resolved, but in fact in Russia’s favor.

Due to the threat of new provocations from Moscow, Ukraine and the EU intensified practical measures to reduce energy dependence on Russia. In this regard, Ukraine focused its main efforts on securing reverse gas supplies from Europe, first virtually, and since the 2020s, physically (through Hungary, Poland, and Slovakia). As a result, Ukraine has now completely stopped importing gas from Russia, although it continues to transit it to European countries.

In its turn, the EU has focused on developing the infrastructure for receiving liquefied natural gas from the United States, Qatar, and other countries. In addition, measures were taken to increase own gas production, particularly in the North Sea. The unification of gas transportation networks of the EU member states was of great importance, having made it possible to create a single gas market and ensure the possibility of its redistribution among different European countries. Thus, the EU has significantly reduced its dependence on Russian gas.

All this significantly increased the resilience of Ukraine and Europe to Moscow’s energy blackmail. Therefore, since 2022, after a full-scale attack on Ukraine, Russia has radically changed the forms and methods of its energy wars. Thus, after the final failure of the “blitzkrieg” in Ukraine, since the autumn of 2022 Russia began to launch massive missile and UAV strikes on Ukrainian energy infrastructure to destroy Ukraine’s economy and create unbearable living conditions for Ukrainian society. The main targets of Russian air strikes were thermal and hydroelectric power plants, electricity transmission and distribution stations, and oil and gas infrastructure. Due to significant damage to Ukrainian energy facilities, restrictions were imposed on electricity supplies to consumers across the country.

At the first stage, Russia’s partial success was facilitated by the fact that Ukraine did not have a powerful air defense system and the ability to retaliate. However, by mid-spring 2023, with the help of Western partners, Ukraine managed to restore some elements of its energy infrastructure and stable electricity supply to consumers. To a large extent, this was made possible by the effective air defense equipment Ukraine received from its Western partners. In addition, the establishment of the production of its own missiles and UAVs provided Ukraine with effective tools for tangible retaliatory strikes against the enemy’s energy facilities.

Russia’s powerful new attacks on Ukraine’s energy infrastructure in March and August 2024 led to new restrictions on electricity supplies. At the same time, thanks to the existing experience and the West’s assistance, stable electricity supply was restored. And Russia received an adequate response with new strikes on its oil depots, refineries, and other energy facilities.

Ukraine’s actions to undermine Russia’s energy sector are facilitated by the political and economic sanctions imposed by the United States and the EU against the Putin regime. Among other things, they include a price cap on Russian oil; a ban on investing in Russia’s energy sector; transfer of technology and equipment for oil production and refining; imports of crude oil from Russia by sea and pipelines to Poland and Germany; imports of liquefied natural gas (LNG) and coal; and the use of European ports for re-export of Russian LNG.

Despite the fact that Russia manages to partially circumvent sanctions, in 2023 its net budget revenues from oil and gas exports fell by 24 %. Due to the West’s harsh sanctions policy, Russia’s oil and gas industry faces a bleak future. The United States and Europe no longer object to Ukrainian strikes on Russian energy facilities, although they do not allow the use of Western weapons for such strikes. The experience of Ukraine’s cooperation with its Western partners proves that obtaining such permission is a matter of the near future, so the Russian energy sector will face the fate of the Nord Stream gas pipeline, which was destroyed in September 2022.

Thus, since the collapse of the USSR, energy wars have remained one of the Russia’s main tools to realize its interests in Ukraine and Europe. During this period, they have changed significantly, progressing from political and economic to military methods. At the same time, Ukraine has managed to develop quite effective mechanisms of response, including adequate methods in relation to Russia. At this, Ukraine’s main achievement was the final refusal to purchase Russian oil and gas.

The European Union’s position has also fundamentally changed. Previously, the EU tried to avoid excessive aggravation of relations with Russia because of its critical dependence on Russian energy carriers. Now, the united Europe has actually got rid of this dependence, which allows it to pursue a tougher policy toward the Russian Federation.