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Analysis

In A Masterstroke Of Statecraft, Russia May Soon Control Ukraine’s Gas Fields

Much changed in Ukraine after the election of Vladimir Zelenskiy to the presidency. More change is to come; some not good for Ukrainian sovereignty.

Although the Crimean peninsula is still in Russian hands, and Donbas still suffers from a bloody war, the Russian Federation may soon control the crown jewels of Ukrainian off-shore gas fields — those under the Black Sea.

Ukraine has long suffered under the yoke of Russia’s punitive gas policies. The state-controlled giant Gazprom has cut supplies in the middle of the winter and grossly inflated prices. The motivation behind the construction of Nord Stream II and Turkstream pipelines are clear — to pressure Kyiv financially by destroying its $3 billion gas transit business. The weaponization of energy is a Kremlin hallmark. However, in a masterstroke of statecraft, the Kremlin may have found a way to strengthen its oil and gas business, while at the same time cementing hydrocarbon production control over the coveted Black Sea region.

The West has long encouraged Ukraine to develop its own gas fields, in order to improve energy security, strengthen trade balance, and remove itself from under Gazprom’s shadow .Ukraine is finally moving forward in 2019 by auctioning multiple subsoil plots under the Black Sea to increase domestic natural gas production . Kyiv would no longer be subject to Russia’s turning off the gas on a whim during a harsh winter. The future looked bright.

“The most promising is a site near Odessa called Dolphin. The bidders include two American companies, Trident Acquisitions (created by large American investors, represented in Ukraine by the ex-MP of the Russian State Duma Ilya Ponomarev) and Frontera Resources (associated with Vladimir Ignashchenko, Advisor to the Minister of Energy); one Ukrainian company Ukrnefteburenie (according to media controlled by businessmen Igor Kolomoysky, Pavel Fuchs and Member of Parliament Vitaly Khomutynnik ); and one more – Azerbaijani Caspian Drilling Co. (CDC) (which is influenced by people’s deputy Andrei Ivanchuk and his childhood friend, former Prime Minister Arseniy Yatsenyuk),” reported Ukrainian news outlet Apostroph.ua.

It is the last entry into the competition for Dolphin that is the most troubling, for CDC is reported to be the front-runner for being awarded the contract. Who invited an Azerbaijani state-owned drilling company into the competition for developing Ukrainian gas? Turns out this was llham Mamedov, a prominent figure in the Ukrainian oil and gas market, who “facilitated the invitation” through the current Energy Minister Igor Nasalik. He is reportedly assisted by the former MP Ivanchuk and former Prime Minister Yatsenyuk, along with the Parliamentary Deputy Igor Kononenko. Mr. Mamedov is the head of Lukoil-Ukraine, the subsidiary of the massive Russian oil giant headed by Vagit Alekperov, a fellow Azeri.

The method behind the madness suddenly becomes very clear.

CDC, a subsidiary of Azeri state-owned oil behemoth SOCAR has never produced oil and gas outside the Caspian Sea; however, Lukoil sure has, and currently owns stakes in Romanian fields offshore. “Lukoil, rather, has so far invested, only to block the success of the most promising projects – both on the Black Sea shelf — and in the development of shale deposits in Romania. This is hardly a mere coincidence,” writes Apostroph.ua.

The public was reassured – in Ukraine, everyone knows the gas stations of SOCAR, and no one is surprised at their participation in the competition – after all, only experts know that this company produces exclusively in the Caspian Sea.

As a result, the pro-Russian CDC represents serious competition to two American companies, previously considered favorites of the contest that the US Secretary of Energy Rick Perry followed with great interest.

It is important to note that Yatsenyuk, Kononenko and Nasalik, having fallen out of power in Ukraine after the elections to the Verkhovna Rada, which are rapidly approaching in July, apparently willing to take the money of those whom they ardently called from the halls of power “aggressors”.

Moreover, there are questions about the Alekperov connections with the Chairman of the Azeri national oil company Rovnag Abdullayev. In June his son Rashad complained to the police of the Spanish island of Ibiza, claiming a theft of a $1.3 million watch. Bloomberg is reporting media interest as to how the son of a “state employee” of Azerbaijan may come into possession of such a watch.

Transparency International ranks Azerbaijan 152nd out of 180 in the global corruption index, as questions of corruption and money laundering long hounded the oil-rich country in the Caucasus. As President Ilham Aliev long warned state employees to watch their conspicuous consumption, Abdullayev senior appears vulnerable in the aftermath of the Spanish police probe and may not want to push the Ukrainian offshore bid to avoid scrutiny.

However, if CDC wins the gas field bid, as soon as next week Lukoil may receive a promising Ukrainian off shore gas field in addition to its Romanian assets, and, unlike the Crimea, it will not be burdened with international sanctions. In that case, the result of the game of energy geopolitics will be Kremlin: 1, Ukraine: 0.

Originally posted at The Washington Times

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