Ukraine Episode Provides Lesson on Energy Security
By Don G. Briggs, President – LOGA (Louisiana Oil & Gas Association)

Who do you believe? Today the United States imports 70% of the oil needed to run the engines of our country. For the most part these countries do not like us. Seventy-five percent of our nation’s oil consumption is use for transportation. Do you believe our national security is at risk with such an arrangement? 

On January 7th, just two weeks ago, Russia closed the valves of the pipelines providing the transportation of natural gas to the EU (European Union) and Ukraine. Russia claims that Ukraine is stealing gas as it passes through Ukraine to European Countries.  

Today ask the people of the 27 member countries of the EU or the 15 former Soviet and Soviet satellite countries if they believe Russia is will open the valves and start pumping the natural gas needed to heat their homes, and run their factories? Do they believe Russia will honor contracts that are vital to their energy needs?  

Twenty-five percent of the EU’s natural gas is imported from Russia. Eighty percent of that is transported to the EU countries through Ukraine, via pipeline. Germany imports 39% of its natural gas consumption from Russia, Turkey 65%, Greece 82% and Italy 31%. Bulgaria imports 92% of its natural gas from Russian, via Ukraine, and is the hardest hit by the shut down.  

“When you look at an iceberg, are you seeing the whole iceberg or is it actually much larger,” said Paul Hilliard in a discussion about this issue. “Here’s the other side of the story” as Paul Harvey would say.  

Ukraine was part of the Former Soviet Union and unlike most of the former Russian satellite countries Ukraine has developed a friendly foreign policy toward their EU neighbors to the west. Ukraine has joined the World Trade Organization, to Russia’s aversion and is working to be a member of NATO and possibly the EU.  

More of the iceberg; Gazprom, Russia’s 51% state-run natural gas company is finding itself in severe financial difficulties after squandering the massive profits from the past years’ high gas prices, which imperils the energy dependent Russian economy. How do you fix low gas prices? Close the valve and then raise prices, which you will see Gazprom do.  

One more piece of the iceberg; Russia is sending a message of a more aggressive foreign policy to the EU and the West, saying they carry a big club and it could be used on them as it is on Ukraine if they continue to give support to Ukraine and recently to Georgia. Russia, in the past years, has made it clear they want to regain their place as a world power.  

In the meantime, while Russia and Ukraine negotiate a settlement, factories are shut down and tens of thousand of people are left in the cold of their homes. When a settlement is made it will take weeks to get the gas system back on line. Natural gas storage facilities located throughout the EU are rationing gas. However, inventories are running dangerously low.  

With turmoil throughout the world you cannot help but ask yourself, “Who do you believe? Do you believe politicians? Do you believe Wall Street? Do you believe the bailouts? Do you believe our energy security is at risk?