Could gas and oil be the cause of wars started by the US in Ukraine and Syria? The Burning Point is discussing it with Dr. Konstantin Kholodilin, based at the German Institute for Economic Research, and Alastair Crooke, the founder and director of the Conflicts Forum.
According to Michael T. Klare, the author of "The Race for What’s Left" (2012), if you scan the planet for conflict, “what you’ll find from Syria and Iraq to the South China Sea are a series of energy wars -- fossil-fuel conflicts to be exact”. These armed conflict are launched under shaky pretexts and increasingly cynical in handling. Iraq, Libya, Sudan have already been ripped apart. Syria is still fighting… Now - Ukraine…
Dr. Konstantin Kholodilin, German Institute for Economic Research:
I checked the data on technically recoverable shale gas reserves in different countries, for instance, the data provided by Energy Information Administration in the USA Energy Department, and it turns out that in Europe in terms of the reserves, Ukraine occupies the third position after Poland and France, which makes it is quite important. Especially bearing in mind that due to the ecological dangers connected with shale gas extraction, it has been banned in many European countries, like, for instance, in France – the second-largest holder of the shale gas reserves in Europe. So the only two large shale-gas holders that remain, are Poland and Ukraine. That means that Ukraine is seen as a potentially important provider of shale gas, which in it turn implies, that this consideration could play a role in the unwinding crisis. However, the extent of this role I cannot really determine.
Alastair Crooke, political analyst, the founder and director of the Conflicts Forum, and a former advisor to Javier Solana, then High Representative for Common Foreign and Security Policy of the European Union:
…What we see in Ukraine is very clearly a struggle over the question of supplies of gas and oil to Central Europe. And here there are two crucial things. The first is an attempt to reduce Russian dependency, as it is described by Americans, on European market. Historically, there has been a long sense in America, there has been a desire to drive a wedge between Germany and Russia. This has been a neo-liberal objective for some time, a fear of a German-Russian axis coming into being which would deprive America of much of its political power in Europe. At the same time, the has also been a glut of gas supplies in America which last year because of the now diminishing but the then flourishing fracking boom on gas which drove the price down of domestic gas supplies in US to 2$ equivalent for per 1000 units. Many companies have been pressing to have these surplus gas supplies the US liquefied and sent to Europe to replace Russian gas. So this is when Ukraine comes in, because still many of the transit routes for gas cross Ukraine to Europe. The EU and the US, at the same time, are mounting a very strong campaign against South Stream – a separate gas pipe line which would go through the Black sea and enter into Southern Europe this way and terminate in Austria. So, there is, of course, a large element of energy war, and a bigger war is taking place over the question of supplies of oil in the Middle East and of the price of both oil and gas. Russia plays an important role in this, and of course equally America is determined to lessen Russia’s role and influence in geopolitical struggle, a game if you like.
— A 50-year long contract was signed by the then President Yanukovich, a month before he had to go. This contract was with companies Shell and Chevron on production of the shale gas in the South-East part of Ukraine. So the assertion is that this is one of the primary causes of the so-called anti-terrorist operation in that part of the country.
— I can’t tell you that it was a 50-year contract, but there was certainly a contract signed for the exploration of shale oil and gas reserves in Ukraine. However, these oil and gas reserves are very speculative, they haven’t yet been tested, so it was more for exploration wells and drilling than a contract for some known entity. There has been a great deal of hype about fracking, generally. In many cases it’s proved to be too costly, the cost of producing the oil and the outcome make the total cost above the world price for a barrel of oil. America is in a unique situation, because it has the drilling rigs, the pipe structure, and this has made it an economic prospect. But for most of the rest of the world fracking which requires a huge investment in terms of drilling capacity, pipe lines and also in continuing to explore, has not proved to be very viable. But I think what was also very interesting, was the sense that they were also looking at the extended economic zones of Ukraine and looking at those for a possibility of oil well drilling. This time we are talking about the seabed reserves, not the shale gas exploration. There was a real sense of energy prospect in Ukraine, being considered important. But it’s, probably, more the off -shore ones, than the shale ones which were really of interest for foreign investors.
— Are you referring to that Burisma Holdings company where Joe Biden placed his son on the board of directors?
— Yes, that’s one of them. Exactly.
— It’s also interesting that Chevron has sold off its shale gas assets in the US. Could it be just because it is an economically unviable project?
— That’s right. There is a big spike in production in the first 18 months – 2 years, and then the growth of production falls off dramatically. The only way to keep the wells productive is to employ massive drilling in order to keep the flow constant. But the cost of doing this is very high. Most of them are not making money and some of them are sustaining large losses and they are trying to shed these wells onto other investors. The ones that are easy to exploit and that are being profitable have largely been grabbed up and taken some time ago. The ones that people are looking at are consuming huge investment. If you look at the extent of new investment in these wells and the increase in output – they don’t match up, it’s going to be a debt problem emerging for some of the big oil companies from that. It’s quite different when you are looking at the low-cost oil. Some of the low-cost oil which can be off the coast but in shallow waters can be very attractive. There is only one remaining if you like abundant reserves of low-cost oil by which I mean that which costs 8$ a barrel to extract total cost – and that is in Iran and Iraq.
— What about the recently discovered reserve located along the shores of Syria and, partly, Israel?
— In terms of the Syrian conflict, before the war had started one of the elements of this conflict was Qatar who tried to persuade the Syrian government to agree to a gas pipe line going to Europe through Syria. Otherwise, Qatar has to produce rather expensive liquefied gas. Saudi Arabia was also not allowing to have a pipe line. When Syria refused it had a big impact on the decision of Qatar to support the resistance. The evidence for that was in the contract they drew up with the opposition Syrian group. It clearly specified the rights of Qatar to have an oil-gas pipe line through Syria and that they would control the energy transit routes across Syria. And that was made in a specific contract with the groups in order for them to get funding. So it has been a very important factor. In 2011 Syria made some exploratory wells that haven’t been pursued further, which showed that there would be potentially huge energy reserves of gas just off the Syrian coast. All in all, it was possible that Syria could become an important player in this process both for Europe and for the region as a whole. All this contributed to what happened in Syria.
— How does the ISIS fit in the whole picture? There was the ISIS offensive in Iraq, Kurds said that they are about to be a legally autonomous region, and Israel was quick to say that it is quite prepared to recognize the autonomy of Iraqi Kurdistan, and the Kurds are sitting on oil, aren’t they?
— They were sitting on modest amounts of oil and now they are sitting on more oil, because that seizure of Kirkuk which is an Arab-majority city and a disputed area for which the Sunnis make a claim, this has launched a real dispute. There seems to be an understanding that took place between Turkey and Masoud Barzani that the seizure of Kirkuk would not be contested, and then the oil would, of course, flow through Turkey to the ports of Turkey for export, subsequently. Perhaps, in consequence, some of the Kurds in Turkey would vote for PM Erdogan in the forthcoming Presidential elections. So far there has been no action by DAASH (or ISIS), although they have been working very strongly to secure the oil fields of Eastern Syria in order to fund their own operation. They have been trying to become self-sufficient. One of the fields is giving them an income approaching million US dollars a day. They have oilfields in Deir ez-Zor, so they have a real revenue flow coming in. The question is if the ISIS is successful in extending further, would they contest with the Kurds, with the Peshmerga for the oilfields in Kirkuk? We have to wait and see whether they will need it. Any organization, like ISIS, clearly needs large relatively free income to produce a project for changing the Middle East. So it will need large sources of income, and the only way for that is to try and turn itself into an oil caliphate. And that is what they seem to have in mind – to turn into an oil caliphate in order to fund their bigger project.