|Ukraine’s Acting Minister of Energy and Mines,Yuriy Prodan, met with Royal Dutch Shell’s (Shell Oil) Ukraine VP yesterday to discuss natural gas production plans in the eastern part of the country. It’s estimated that Ukraine sits on top of a quarter of the world’s natural gas reserves. The agreement for Shell to produce natural gas in the region was signed a year ago and exploratory operations have been completed. The plan is for Shell to use fracking to extract the shale gas.
The announcement was posted on Ukraine’s government website which offers frequent updates on the interim government’s activities in a multi-lingual formal. (Pages that haven’t been pre-translated into English can be translated by your browser.)
|Shell ‘s description of the project is posted on its website.|
|The turmoil in Kyiv didn’t hinder Shell’s plans which were confirmed through Ukraine’s Ambassador to the Netherlands in January. Now it appears that Shell will proceed normally even with the volatile situation involving Crimea and Russia.
|Ambassador of Ukraine to the Kingdom of the Netherlands met with Royal Dutch Shell representatives
On January 22, 2014 the Ambassador of Ukraine to the Netherlands, Olexander Horin, met with Vice President Shell Ukraine Graham Tiley . . .
Broad range of issues concerning cooperation between Shell and Ukraine was discussed during the meeting including company's projects in Kharkiv and Donetsk regions, as well as implementation of the arrangements achieved at the meeting . . .
Shell’s representatives reconfirmed company’s interest to further deepen its cooperation with Ukraine.
Ukraine also signed cooperative agreements with Chevron and Exxon Mobil a year ago and the deals were touted as “energy independence” for Ukraine which depends on Russia for its supply. There was a gas war between the two countries when Yulia Tymoshenko was in office as Prime Minister and Russia cut the supply at the beginning of 2009.
However, Russia also depends on natural gas. Its sales through the state-owned company, Gazprom, are an important source of revenue. Russia also depends on the pipelines that traverse Ukraine to transport natural gas to Austria, Bulgaria, Croatia, Czech Republic, Hungary, Moldova, Romania, Serbia, Slovakia,and others. The risk of losing access to these markets to competition from a natural gas producing Ukraine would be reason enough for Putin’s tantrum.
Most Americans have no way of talking about Ukraine today, because they don’t have any real knowledge or information about it. Lately, the talk about Ukraine crossed a boundary into the unusual.
Tossing around words like fascist and Nazi would jeopardize your credibility until a few weeks ago. Now the public discourse sounds like a schoolyard name calling contest. Lurid pictures of grimy, menacing guttersnipes sporting the accessories and insignia of 1930s Germany are passed around with claims that imply neo-Nazis seized power in Ukraine. It isn't true and Vladimir Putin isn't Hitler either.
|If you want current updated information about the activities of Ukraine’s government, browse its website.|
Its tempting to blame the IMF, the World Bank, or the EU for Ukraine's problems. Saying so doesn't make it so.
Look at Ukraine’s budget. The government raises a lot of revenue. The amount, as a percentage of GDP, is comparable to revenue collected in Western European countries. A strong social safety net is written into Ukraine’s constitution, too, but the country has nothing to show for the amount of money it spends.
Average life expectancy is noticeably lower than any country in Europe, and deaths exceed births and the country’s population declined by more than 10% in the last 20 years.
Personal income is far lower than anywhere in Europe. It averages less than $6,000 a year in Kyiv and under $4,000 in the rest of the country. About 29% of the population are pensioners who receive an average of $2,000 a year. The number of students enrolled in schools is shrinking faster than the general population. This is an impoverished country. It is assumed that a substantial portion of the economy must be underground.
The outstanding feature of Ukraine’s economic woes is the amount of money spent on natural gas subsidies. Instead of prioritizing funds for education, health, pensions, or welfare, Ukraine spends more on subsidies paid to households for natural gas consumption. The natural gas subsidies have been studied by a number of observers that noted concerns. I’ll skip the statistics because the use of metering to measure consumption isn't standard in Ukraine. Instead, consumption is estimated. More than one study determined that the subsidies are regressive, with a disproportionate amount paid to the wealthiest. These conditions are far worse than any austerity pushed by neo-liberal economists.
It could be considered provocative for Big Oil from Western Europe or the US to set up business right on Ukraine’s border with Russia. Ukraine’s profile attracts global business corporations with money, power, and influence that easily overpowers the national government of a poor country. Shell’s annual revenue is more than the entire GDP of Ukraine. The political party in power makes no difference and there’s no need for a coup d’etat. It would be superfluous. The overthrow of Yanukovych was barely a speed bump to Shell.
Extreme nationalism and fascist tendencies are as obsolete as national governments. The nation state with its sovereign status is superseded by global business that makes the rules it wants without regard for any citizen’s interest.
A greater economic integration, if it ever comes about, would open the door for mass surveillance. The key is access to Ukraine’s and eventually Russia’s banking and financial transactions. This may be the primary reason for Putin’s tantrum and the ultimatum he gave Ukraine to choose either the EU or Russia, but not both. Open doors would invite the long arm of the NSA to reach into Russia. As Europe recently learned, the Patriot Act has an extraterritoriality clause that the US uses for classified national security reasons.
For now, Russia is digging in its heels in Crimea. It would be interesting to hear Putin say whether he ever considered developing the shale gas fields just inside Ukraine's border.
|The primary sources of information for this analysis include:
The Kremlin’s English language website where transcripts of press conferences given by Putin are archived.
The Government of Ukraine’s website (multi-lingual with most pages available in English) which features information about the Parliament, the Cabiinet of Ministers, the Judicial system, and the State and Local Governments.
The State Statistics Service of Ukraine multi-lingual with English available)