[Choi Ji-woong's Energy War] The Dynamics of Energy Resources and the Ukraine Crisis

Oil and Gas Transit Routes
Political and Diplomatic Influence Beyond Energy Supply

Connecting Russia-Europe Without Passing Through Ukraine
Major Gas Pipeline 'Nord Stream' Operated by NATO Member Countries

With 'Nord Stream 2' Opening,
Russia Gains Strong Leverage
US Cites 'Ukraine NATO Membership' as Reason

Energy Serves as Both Weapon and Shield
Importance of Supply and Stockpiling Must Be Considered

Editor's NoteAsia Economy Newspaper publishes a monthly series every Thursday titled 'Choi Ji-woong's Energy War,' which analyzes the energy industry undergoing a great transformation and examines the related changes in the international order. The author is an expert in the energy field who joined Korea National Oil Corporation in 2008, worked in the Europe and Africa Business Division and the Stockpile Business Division, and completed an MBA program in Oil and Gas at Coventry University in London in 2015. He is also the author of the bestseller "How Oil Rules the World," which covers the modern history of oil.

Like the Strait of Hormuz and the Suez Canal, the passages through which oil and gas flow hold political and diplomatic influence beyond their significance as energy supply routes. The gas pipeline between Russia and Germany, Nord Stream 2, completed last September, is no exception. Nord Stream 2 was constructed under the leadership of Russia's state-owned company Gazprom. Once operational, this pipeline, together with the existing Nord Stream 1, can transport about half of Europe's annual gas demand. However, due to escalating military tensions between Russia and Ukraine, the opening date remains uncertain.

Before Nord Stream existed, Russia supplied gas to Europe through pipelines passing via Ukraine. In contrast, Nord Stream connects Russia's western region to Germany through the Baltic Sea, bypassing Ukraine. The opening of a major gas pipeline linking Russia and Europe without passing through Ukraine carries significant geopolitical implications. For Ukraine, it means losing a deterrent against war. When pipelines passing through Ukraine were the main transportation routes, Ukraine could leverage these pipelines as a bargaining tool against Russia.

In today's international relations, aside from military means, the most powerful way to strike an opponent is to block oil and gas trade. As seen in the bans on Iranian crude oil exports and North Korean oil sanctions, restricting oil and gas transactions is the strongest control measure after military action. Suppliers gain the greatest economic profits, while importers lose energy resources fundamental to their industries and daily lives. In the past, Ukraine could shut off or destroy pipelines passing through its territory if threatened by Russia. However, Nord Stream 1 and 2 do not pass through Ukraine. The increased military threat from Russia since the completion of Nord Stream 2 last September is no coincidence. Now, Russia can invade Ukraine without losing its main industrial assets, and even without invasion, this new situation exerts strong diplomatic leverage.

For Russia, Ukraine is the last bastion of security. During the Soviet era, Soviet influence extended to East Germany. However, after the Berlin Wall fell in 1989 and the Soviet Union collapsed in 1991, Eastern European countries formerly under Soviet influence gradually joined the NATO alliance led by the United States. In 1999, countries like the Czech Republic, Poland, and Hungary joined in large numbers, followed by Bulgaria, Estonia, Latvia, and Romania in 2004. Montenegro joined in 2017, bringing the total NATO membership to 29 countries. The current Ukrainian government also shows a pro-Western stance. If Ukraine joins NATO, this U.S.-centered military alliance would directly border Russia. The distance from the Ukrainian border to Moscow is only 490 km. The deployment of even U.S. missiles there would pose a significant threat to Russian security. Russia demands a halt to NATO's eastward expansion and a guarantee that Ukraine will not join NATO.

Jiwung Choi, Researcher at Korea National Oil Corporation Smart Data Center

From the U.S. perspective, Nord Stream 2 has been a significant concern. The U.S. has fundamentally opposed NATO member countries becoming integrated into Russia's energy supply network, as Russia could use gas supply to extend its influence over NATO members. Therefore, the U.S. has consistently opposed the construction of this pipeline and sanctioned companies involved in its construction. This led to a prolonged suspension of construction in 2019.

In December last year, the Biden administration declared that if Russia invades Ukraine, it would shut down Nord Stream. If implemented, Russia would lose all its gas export routes to Europe. In a scenario where Nord Stream is closed, Ukraine, if invaded, could also destroy its own pipelines. This would cause enormous losses to Europe but could lead to economic collapse in Russia. Currently, Russia supplies about 40% of Europe's gas demand. Losing both the pipelines passing through Ukraine and Nord Stream would eliminate Russia's most important source of income. On January 19, President Biden reiterated that Nord Stream 2 would be shut down if Russia invades Ukraine.

One of the key reasons the U.S. can maintain hegemony is its control over maritime routes and oil transportation lanes. However, Nord Stream, the main gas supply route for Europe, is different. Since NATO members operate and depend on it, the U.S. cannot control it as it wishes. Originally, this pipeline was planned by Germany, the U.S.'s largest ally in Europe. In 2005, then-German Chancellor Gerhard Schr?der and Russian President Vladimir Putin signed an agreement for the 'Northern European Gas Pipeline' project. Later, Chancellor Angela Merkel proceeded with the project and opposed U.S. objections as interference in internal affairs. Once Nord Stream 2 opens, Russia will gain strong leverage to influence Europe. Conversely, this situation strengthens the U.S. rationale for integrating Ukraine into NATO.

The U.S. does not want NATO members to be unilaterally dependent on Russian gas. To prevent Russia from weaponizing gas for political influence, either more U.S. shale gas must be exported to Europe, or Europe's share of renewable energy must increase significantly to reduce dependence on Russian gas. Both scenarios are plausible at present. Europe's renewable energy share continues to rise, and U.S. natural gas production is expected to increase substantially this year. In international relations, energy can be a weapon or a shield. Considering Korea's geopolitical position and the fact that its energy supply routes are heavily influenced by international affairs, it is important to reflect on the significance of self-supplying and stockpiling energy resources.

Choi Ji-woong, Researcher, Smart Data Center, Korea National Oil Corporation

This content was produced with the assistance of AI translation services.