Options for Ukraine to Address the Impact of the Nord Stream 2 Gas Pipeline

Madison Sargeant is a Midshipman in the U.S. Navy’s Reserve Officer Training Corps at Boston University and is currently studying International Relations and Statistical Methods. She can be found at @SargeantMadison on Twitter. Divergent Options’ content does not contain information of an official nature, nor does the content represent the official position of any government, any organization, or any group.


National Security Situation:  The development of the Nord Stream 2 gas pipeline running from Russia to Europe across the Baltic Sea threatens Ukrainian economic and national security.

Date Originally Written:  June 24, 2020.

Date Originally Published:  August 26, 2020.

Author and / or Article Point of View:  The article is written from the perspective of the Ukrainian government.

Background:  Energy security is an increasingly pressing issue for the European Union (EU). As indigenous natural gas production diminishes, energy demands increase, and relations with the Russian Federation become more divisive, natural gas imports have become a widely debated topic among EU member states. The annexation of Crimea and subsequent support for separatists in eastern Ukraine by the Kremlin has prompted sanctions and statements of solidarity with Ukraine by the European Union. Despite this, EU member states, notably Germany and Italy, have moved forward with pipeline projects that eliminate Ukraine as a transit state for Russian gas.

Development of the Nord Stream 2 pipeline, which bypasses traditional routes through Ukraine, Belarus, and Poland to deliver natural gas directly from Russia to Germany has divided the EU in both political and energy strategy. Another pipeline project, TurkStream, will transport Russian gas through Turkey into southern Europe upon completion. The aggregate capacity of both Nord Stream pipelines, as well as the TurkStream pipeline, rival Ukraine’s entire capacity for Russian natural gas transit[1]. These projects have caused controversy within the EU and outrage from the United States, which has attempted to slow the pipeline’s completion through sanctions. Nord Stream 2 and TurkStream have highlighted the tensions between Russia, Ukraine, and the transatlantic community more broadly.

Significance:  If Russia can bypass transit through Ukraine, it will be less constrained in its war in the Donbass region. Similarly, the European Union will be less incentivized to moderate the conflict between Kyiv and Moscow. From an economic standpoint, Ukraine receives $3 billion U.S. Dollars in Russian gas transit fees annually—revenue that would be lost if Russia no longer needs Ukraine to get gas to its final destination. Ukraine’s Gross Domestic Product in 2018 was a mere 130.8 billion; the loss in revenues would be a significant obstacle to Kyiv’s military efforts in the east, as the government allocates funding between various departments, including that of defense[2]. A weakened economy and loss of European interest in the wellbeing of the Ukrainian state, coupled with safe transport of Russian gas without Ukraine’s pipelines increases the likelihood of Russia intensifying the conflict in eastern Ukraine.

Option #1:  Diversification.

Ukraine could collaborate with the Caucasus and Central Asian states, namely Georgia, Azerbaijan, Turkmenistan, and Kazakhstan to develop energy transit routes across the Caspian and Black Seas, and through Ukraine into Europe. Introducing Central Asian energy into the European market will increase competition and reduce reliance on Russian gas by the EU. This option ensures Ukraine’s role as an energy transit state will not be squashed in the face of new pipeline projects circumventing it, while strengthening Ukraine’s relationship with regional partners.

Risk:  This option would not provide an immediate solution to Ukraine’s predicament as pipeline projects take upwards of ten years. Foreign investment in such a project may be unattractive at this time. Ukraine’s current tax laws dissuade foreign investment and are in need of reform. Europe’s plans to minimize fossil fuel use in the long term may also make this project undesirable, although investment in Nord Stream 2 and other new pipelines suggests otherwise. Most notably, this option does not eliminate the risk of Russia escalating the conflict in eastern Ukraine. Russian gas would still circumvent Ukraine.

Gain:  Central Asian energy transit through Ukraine can replace the revenue lost from the Nord Stream 2 pipeline. Pipeline already exists in Ukraine to carry out transportation, and building pipelines in the Black Sea is less complicated and costly compared to the Baltic Sea[3]. Such a move also increases Ukraine’s political standing in the region and diminishes Russian influence.

Option #2:  Maintaining the status quo.

Ukraine may seek to extend the December 2019 contract with Russia regarding gas transit through Ukraine. This option maintains the status quo between Ukraine, the EU, and Russia. The conflict in eastern Ukraine is likely to remain frozen at its current level and Russia is unlikely to work towards ending it.

Risk:  This option relies on Russian cooperation with Ukraine. When both Nord Stream 2 and TurkStream are fully online, Russia will have options regarding how it transports its natural gas to European clients. Ultimately, this option is one that only buys Ukraine time in finding a solution to the military conflict in the east.

Gain:  In the short term, Ukraine and Russia would remain dependent on one another for safe gas transit through Ukraine, which decreases the likelihood of Russia escalating the conflict. Additionally, Ukraine may not suffer greatly from loss of revenue depending on how many cubic meters of gas are redirected from Ukrainian pipelines to Nord Stream 2 and TurkStream. This option also incentives the EU member states to stay involved in the conflict resolution process in Ukraine.

Other Comments:  Both options require a reevaluation of the compatibility of the EU’s energy and Ukraine policies. The EU cannot actively support Ukraine’s territorial integrity and autonomy while engaging in economic developments that undermine Ukraine’s ability to fund its military activities against Russian aggression. With European investment in Nord Stream 2 and TurkStream, it is substantially more difficult for Ukraine to attract the European support it needs to combat the problems it faces economically, politically, and militarily. EU policies that are coherent and consequential are critical to any improved standing for Ukraine.

Recommendation:  None.


Endnotes:

[1] Sydoruk, T., Stepanets, P., & Tymeichuk, I. (2019). Nord Stream 2 as a Threat to National Interests of Poland and Ukraine. Studia Politica; Romanian Political Science Review, 19(3/4), 467-490.

[2] Ellyatt, H. (2019, December 16). Ukraine and Russia look to strike new gas deal amid US sanctions threat. https://www.cnbc.com/2019/12/16/ukraine-and-russia-look-to-strike-gas-transit-deal.html

[3] Oliker, O. (1999, December 31). Ukraine and the Caspian: An Opportunity for the United States. Retrieved June 16, 2020, from https://www.rand.org/pubs/issue_papers/IP198.html

Madison Sargeant Option Papers Resource Scarcity Russia Ukraine

U.S. Options to Combat Chinese Technological Hegemony

Ilyar Dulat, Kayla Ibrahim, Morgan Rose, Madison Sargeant, and Tyler Wilkins are Interns at the College of Information and Cyberspace at the National Defense UniversityDivergent Options’ content does not contain information of an official nature nor does the content represent the official position of any government, any organization, or any group.


National Security Situation:  China’s technological rise threatens U.S. interests both on and off the battlefield.

Date Originally Written:  July 22, 2019.

Date Originally Published:  February 10, 2020.

Author and / or Article Point of View:  This article is written from the point of view of the United States Government.

Background:  Xi Jinping, the Chairman of China’s Central Military Commission. affirmed in 2012 that China is acting to redefine the international world order through revisionist policies[1]. These policies foster an environment open to authoritarianism thus undermining Western liberal values. The Chinese Communist Party (CCP) utilizes emerging technologies to restrict individual freedoms of Chinese citizens, in and out of cyberspace. Subsequently, Chinese companies have exported this freedom-restricting technology to other countries, such as Ethiopia and Iran, for little cost. These technologies, which include Artificial Intelligence-based surveillance systems and nationalized Internet services, allow authoritarian governments to effectively suppress political dissent and discourse within their states. Essentially monopolizing the tech industry through low prices, China hopes to gain the loyalty of these states to obtain the political clout necessary to overcome the United States as the global hegemon.

Significance:  Among the technologies China is pursuing, 5G is of particular interest to the U.S.  If China becomes the leader of 5G network technologies and artificial intelligence, this will allow for opportunities to disrupt the confidentiality, integrity, and availability of data. China has been able to aid regimes and fragmented democracies in repressing freedom of speech and restricting human rights using “digital tools of surveillance and control[2].” Furthermore, China’s National Security Law of 2015 requires all Chinese tech companies’ compliance with the CCP. These Chinese tech companies are legally bound to share data and information housed on Chinese technology, both in-state and abroad. They are also required to remain silent about their disclosure of private data to the CCP. As such, information about private citizens and governments around the world is provided to the Chinese government without transparency. By deploying hardware and software for countries seeking to expand their networks, the CCP could use its authority over domestic tech companies to gain access to information transferred over Chinese built networks, posing a significant threat to the national security interests of the U.S. and its Allies and Partners. With China leading 5G, the military forces of the U.S. and its Allies and Partners would be restricted in their ability to rely on indigenous telecoms abroad, which could cripple operations critical to U.S. interests [3]. This risk becomes even greater with the threat of U.S. Allies and Partners adopting Chinese 5G infrastructure, despite the harm this move would do to information sharing with the United States.

If China continues its current trajectory, the U.S. and its advocacy for personal freedoms will grow increasingly marginal in the discussion of human rights in the digital age. In light of the increasing importance of the cyber domain, the United States cannot afford to assume that its global leadership will seamlessly transfer to, and maintain itself within, cyberspace. The United States’ position as a leader in cyber technology is under threat unless it vigilantly pursues leadership in advancing and regulating the exchange of digital information.

Option #1:  Domestic Investment.

The U.S. government could facilitate a favorable environment for the development of 5G infrastructure through domestic telecom providers. Thus far, Chinese companies Huawei and ZTE have been able to outbid major European companies for 5G contracts. American companies that are developing 5G infrastructure are not large enough to compete at this time. By investing in 5G development domestically, the U.S. and its Allies and Partners would have 5G options other than Huawei and ZTE available to them. This option provides American companies with a playing field equal to their Chinese counterparts.

Risk:  Congressional approval to fund 5G infrastructure development will prove to be a major obstacle. Funding a development project can quickly become a bipartisan issue. Fiscal conservatives might argue that markets should drive development, while those who believe in strong government oversight might argue that the government should spearhead 5G development. Additionally, government subsidized projects have previously failed. As such, there is no guarantee 5G will be different.

Gain:  By investing in domestic telecommunication companies, the United States can remain independent from Chinese infrastructure by mitigating further Chinese expansion. With the U.S. investing domestically and giving subsidies to companies such as Qualcomm and Verizon, American companies can develop their technology faster in an attempt to compete with Huawei and ZTE.

Option #2:  Foreign Subsidization.

The U.S. supports European competitors Nokia and Ericsson, through loans and subsidies, against Huawei and ZTE. In doing so, the United States could offer a conduit for these companies to produce 5G technology at a more competitive price. By providing loans and subsidies to these European companies, the United States delivers a means for these companies to offer more competitive prices and possibly outbid Huawei and ZTE.

Risk:  The American people may be hostile towards a policy that provides U.S. tax dollars to foreign entities. While the U.S. can provide stipulations that come with the funding provided, the U.S. ultimately sacrifices much of the control over the development and implementation of 5G infrastructure.

Gain:  Supporting European tech companies such as Nokia and Ericsson would help deter allied nations from investing in Chinese 5G infrastructure. This option would reinforce the U.S.’s commitment to its European allies, and serve as a reminder that the United States maintains its position as the leader of the liberal international order. Most importantly, this option makes friendlier telecommunications companies more competitive in international markets.

Other Comments:  Both options above would also include the U.S. defining regulations and enforcement mechanisms to promote the fair usage of cyberspace. This fair use would be a significant deviation from a history of loosely defined principles. In pursuit of this fair use, the United States could join the Cyber Operations Resilience Alliance, and encourage legislation within the alliance that invests in democratic states’ cyber capabilities and administers clearly defined principles of digital freedom and the cyber domain.

Recommendation:  None.


Endnotes:

[1] Economy, Elizabeth C. “China’s New Revolution.” Foreign Affairs. June 10, 2019. Accessed July 31, 2019. https://www.foreignaffairs.com/articles/china/2018-04-17/chinas-new-revolution.

[2] Chhabra, Tarun. “The China Challenge, Democracy, and U.S. Grand Strategy.” Democracy & Disorder, February 2019. https://www.brookings.edu/research/the-china-challenge-democracy-and-u-s-grand-strategy/.

[3] “The Overlooked Military Implications of the 5G Debate.” Council on Foreign Relations. Accessed August 01, 2019. https://www.cfr.org/blog/overlooked-military-implications-5g-debate.

Artificial Intelligence & Human-Machine Teaming China (People's Republic of China) Cyberspace Emerging Technology Ilyar Dulat Kayla Ibrahim Madison Sargeant Morgan Rose Option Papers Tyler Wilkins United States