Energy Lessons from the Ukraine Crisis

It is a cliché that wars are fought over energy access.  It is just as trite to point out the illegality of military action to secure energy resources for oneself or to deny energy access to adversaries.  As sanctions against Russia and against Ukrainian separatist regions come into focus, energy access again comes front and center.  Germany’s halt to the certification of the Nord Stream 2 pipeline is perhaps emblematic in this respect.  It attempts to strike at Russian interests by means of limiting energy revenue.  That being said, as has been pointed out, halting Nord Stream 2 does little to stop gas flows through Nord Stream 1 – Germany thus continues to take gas from Russia even as it hopes to sanction Russia by potentially stranding $11 billion in investments in the Nord Stream 2 project.

Much will be written about what sanctions to use, if sanctions are an appropriate foreign policy tool, and whether they are at all effective at curbing behavior.  Suffice it to say that if the vision of sanctions as outlined in some much-praised scholarship had worked, Russia would not have considered it wise to recognize Donetsk’s and Luhansk’s independence.  In fact, there is much to be said that the sanctions regime itself may have contributed to further escalation because they did not lay out a path for successful de-escalation.

The point I wish to clarify is another, and I hope more important one: energy transition policies – particularly when considered in light of legacy energy infrastructure and value chains – materially contribute to conflict.  That is to say, part of what is coming home to roost is a failure by environmental and climate lawyers to understand the repercussions of climate and environmental goals when these goals are translated into energy policy.  A failure to correct course will not just exacerbate the confrontation between Ukraine and NATO, on the one hand, and the Russian Federation on the other.  A failure to correct course will lead to significant, unanswered military escalation in the South China Sea and beyond.  And this escalation is likely to intensify as we seek to implement climate change and environmental policies.

Ukraine is a case in point for just such a conflict. Gas is a critical resource to support European energy transition goals.  While gas is billed as a bridge fuel, it is responsible for 25% or so of total primary energy consumption in 2019 and some 3.118 million TJ in 2020 in Germany alone.  32% of that gas is sourced from Russia.  Historically, because gas exports from Russia to Germany relied upon legacy Soviet infrastructure, Russian gas exports transited Ukraine.  Nord Stream and Nord Stream 2 are attempts to decouple Russian gas exports from that legacy infrastructure.  The confrontation between NATO, the EU, and Ukraine on the one hand and Russia on the other therefore is deeply conditioned by energy value chains. Energy transition policies in Germany in particular have elevated these particular value chains to critical importance due to an exit from coal-fired and nuclear power.

What then is the importance of the Donbas region? After all, it is this region that is at the core of the current confrontation (Donetsk and Luhansk are located there).  Donbas – and particularly the likely target of Russian advances, Mariupol, in Donetsk oblast – is a metallurgical hub.  This hub depends upon coal imported from Russia to produce steel (pp. 182-98).  This steel, in turn, is a critical component for the construction of wind turbines.  Ukrainian steel produced with Russian coal is rolled in the Friuli in Italy and then becomes a key component of “renewable” energy in Europe (pp. 198-202).  The Donbas thus is also of strategic importance for energy transition – and its importance critically relies upon legacy energy value chains linking Ukraine to Russia and Russian energy exports.

The point is not unique to Russia. Most immediately, we are building new energy value chains around pipeline gas and liquified natural gas.  Less immediately, there is a rush for the mineral resources needed to build solar arrays, wind turbines, and batteries – a rush that has a scramble for example for cobalt in the Democratic Republic of Congo.  Given the location and the players involved in these cobalt supplies, it is on the whole not difficult to imagine that the new energy value chains critical for energy transition policies could lead to violent conflict.  And as we think about liquified natural gas, the conflict potential is just as apparent.  Liquified natural gas is transported by tanker. And tankers must pass through shipping lanes.  One of the most important such shipping lanes? The South China Sea.

Obviously, pointing out that an attempt at fundamental reorganization of global energy systems is bound to lead to strife is just as trite as the observations with which I opened this post.  My point is not that this is the case. My point is rather about what should be done about it.

My first point is straightforward. We cannot continue to think about climate policy and climate law as a purely environmental question.  Climate policy is also energy policy and will lead to effects as such. A purely environmental perspective has the potential side effect of inviting the kind of armed conflicts we currently observe simply because we lose legacy infrastructures and energy value chains from view.  And the longer we take to make that realization, the worse the problem will become.

Second, if climate policy is energy policy, it is imperative that it not turn into Real-Energiepolitik.  Rather, we must commit to energy transition pathways that are driven by the progressive global realization of the social, economic, and cultural rights – and the right to development – of all and of each.  In practical terms, this means that affordable energy access and energy security cannot be jeopardized in the name of climate policy.  To do so is to create the conditions for conflict – witness Russia’s incursion into Ukraine at a time of extremely tight gas markets (gas markets which are so tight in significant part because of the energy transition pathways chosen by, for example, leading European economies.).

Third, to shore up energy security requires a significant expansion of fossil fuel capabilities around the world (Russia, Qatar, Australia, and the U.S. to name a few).  An increase in gas availability – be it as pipeline gas or liquified natural gas – can meet rising energy demands. Importantly, if this supply is available from multiple sources, it limits the geo-political power wielded by any one supplier and thus provides a bedrock for energy security.  But it also provides market security for producers.

Finally, to manage energy security requires robust dispute resolution mechanisms.  Trust in energy markets is nearly always backed up by arbitration provisions.  We can choose to vilify arbitration. In fact, we frequently do.  That choice has consequences far beyond the limited type of dispute resolution targeted by those claiming righteous indignation at, say, investor-state arbitration.  The People’s Republic of China feels secure enough to ignore an arbitral award on the South China Sea (one of our flash points).  And Uganda does not feel any particular pressure to comply with a recent judgment by the International Court of Justice in favor of the Democratic Republic of Congo (another future flash point).

If we wish to prevent a proliferation of energy transition wars, international lawyers therefore must act now.  They must do so pragmatically – advocacy and idealism are well and good.  If they intensify flash points for conflict, it is best to tamper both.  They must do so premised in fundamental human rights values – else pragmatism is simply another word for oppression.  And they must do so with a firm defense for international law dispute resolution mechanism – else international rule of law will become an unintended casualty of the many fundamental changes to world society energy transition epitomizes.