The political economy of energy independence: how Ukraine emerged from the configuration of blackmail

In a world where the price of a barrel can destroy an economy, and a valve on a gas pipeline becomes a lever that “launches” rockets, dependence on fossil fuels has turned into the political architecture of international relations. The structure of oil, gas and coal supply often entrenches asymmetry: some countries make decisions, others are forced to adapt to them. This creates chronic vulnerability for energy-dependent economies, especially in environments where energy is used as leverage.

Ukraine has been embedded in such a model for decades. Russian gas, as a source of energy, simultaneously played the role of an instrument of pressure. Gas wars, political ultimatums, manipulation of supply volumes — all this was part of a system in which decisions were made outside Kyiv. Only the gradual exit from this scheme, with the refusal of imports, diversification of routes, development of domestic generation and disconnection from the Russian energy grid, began to change the balance.

World Energy Independence Day: When oil and gas become weapons

Today is the World Day of Energy Independence, the history of which originated in 2008 from the proposal of the Belarusian writer and thinker Ruslan Shoshin. It was he who proposed to draw attention to the transition from fossil fuels to clean, renewable energy sources every year on July 10. It was not by chance that the date was chosen to be the birthday of Nikola Tesla, one of the most famous innovators in the history of energy, who devoted his entire life to the idea of ​​safe, free energy for mankind. Since then, July 10 has become a kind of reminder that energy independence is not only about wires, meters and solar panels. It is about the choice that every country, every city, every consumer makes.

Despite the rapid development of technologies, the world economy is still based on three old “whales” – oil, gas and coal. Not only are these resources undermining the planet’s ecological stability by causing large-scale climate change, but they also have a clear limit, with supplies depleting faster than political solutions to change emerge. And although the scientific community has long sounded the alarm and offered real alternatives, the inertia of dependence on fossil fuels is too convenient for those who are used to monetizing control over energy. In such conditions, the issue of transition to clean energy ceases to be only ecological, it turns into a key to political subjectivity and is able to resist pressure from outside.

A clear example of this is the energy policy of the Russian Federation, which for years has been using gas supplies as a lever of influence not only on Ukraine, which is unlucky enough to be its close neighbor, but also on European countries, building dependence into the geopolitical game. Ukraine’s energy dependence on the Russian Federation has been one of the weakest points of state security for decades. The Kremlin successfully kept Kyiv on the hook for gas contracts, dictating prices, volumes and conditions of supply. Ukraine found itself in a situation where the valve in Moscow had more influence than any diplomatic document. The gas wars of 2006 and 2009 clearly showed this, when instead of an adequate market we received blackmail, and instead of stability came complete political dependence.

However, the last decade was a turning point. From the beginning, Ukraine began to gradually but decisively cut off the energy umbilical cord from the Russian Federation. One of the first serious steps towards a complete refusal to import Russian gas was already in 2015, when our country began to actively diversify supplies by opening reverse routes from Europe through Slovakia, Poland and Hungary.

Green energy also began to be developed not as a trend, but as an element of survival. By 2022, the amount of generation from renewable sources has increased rapidly in the country: solar, wind and bioenergy have begun to occupy a significant share in the energy balance. Despite all the challenges, including the destruction of infrastructure due to shelling, Ukraine not only did not curtail this direction, but on the contrary, after a full-scale invasion, made it even more of a priority.

The breakthrough in the issue of European integration was particularly significant. In March 2022, already during the war, the Ukrainian energy system was urgently disconnected from the Russian and Belarusian grids and joined the continental European ENTSO-E energy grid. What had been planned for years was realized in a matter of weeks under the constant threat of missile strikes and a lack of resources. It was not just a technical achievement, but a symbolic break with the past.

It is likely that the full-scale war, with which the Russian Federation is trying to break Ukrainian statehood, at the same time accelerated those processes that would have lasted for years in peacetime. Energy transformation in Ukraine ceased to be a topic for industry conferences, but turned into a condition of national survival. As we can see, the experience of Ukraine convincingly confirms that energy independence is not just a matter of prestige or a component of the “green” brand, but is a necessary protection, without which the state remains open to external pressure and aggression. That is why such examples clearly demonstrate that the World Day of Energy Independence has a real meaning, and not just a symbolic meaning.

Today, experts note that the Russian gas machine, which for years kept Europe and Ukraine dependent on energy, is slipping. And not because of sanctions or diplomatic pressure, but because of the strategic actions of Ukraine itself. As it turned out, the cessation of the transit of Russian gas through Ukrainian territory was not the catastrophe it was fearfully portrayed as. Ukraine’s gas pipeline system works stably, despite the aggressor’s predictions about its collapse. Our own compressor stations provide the pressure necessary for the uninterrupted supply of gas to Ukrainian cities without any need for transit, and this is subject to constant shelling.

What used to be a trump card in the hands of Gazprom has today turned into a ballast for the Russian Federation itself. The results are obvious: domestic gas prices for the Ukrainian population remain stable at UAH 7.96 per cubic meter. For industry, the increase in the cost of transportation was no more than 5% of the total price. The expected wave of energy shock did not occur. Despite fears, Slovakia has not restricted the transit of goods or electricity. And the European gas market, contrary to forecasts, remains stable. Temporary fluctuations in prices were due to completely different factors, namely the growth of demand in Asia, the crisis in the Persian Gulf or weather conditions, but not by any means the Ukrainian decision to abandon transit.

So while “Gazprom” calculates losses of 6 billion dollars annually, the budget of the Russian Federation faces new holes. The company no longer pays dividends to the state, asks for financial support, and the government is forced to reduce taxes in order to at least somehow support the monopolist. Against the background of rising gas prices in the Russian Federation itself, including planned increases for industry twice a year, it becomes obvious that Ukraine’s energy influence is no longer a myth.

The cessation of gas transit is only the beginning of more serious risks for the Russian Federation, which still earns every year from the transit of oil through Ukraine. But these incomes are also not a guarantee of stability. The Ukrainian Defense Forces already have key objects of the Russian export infrastructure (terminals in Ust-Luz and Novorossiysk) within reach. Consistent pressure on these nodes is capable of collapsing the Kremlin’s profits even more. And Ukraine itself should not wait for the allies to do all the work. The economic weakening of the Russian Federation can become our real contribution to the reduction of war resources.

How Ukraine maintains the energy front without Russian gas

It is worth understanding that energy independence has long ceased to be an unambiguous goal, because today it is increasingly turning into a field of complex compromises. In the era of globalization, no country exists in a vacuum: even the most ambitious energy sovereignty plans sooner or later run into interdependence with partners, technology suppliers, sales markets or raw materials. Indeed, on the one hand, the desire to abandon fossil fuels gives countries a chance to reduce political vulnerability and environmental burden. But at the same time, it creates new points of dependence on the import of solar panels, supply chains of lithium, rare earth metals, on unstable regions with a high concentration of resources or production.

In this system, even the transition to “green” energy does not guarantee full control. For example, a country can abandon Russian gas, but remain dependent on Chinese batteries or European loans for energy modernization. Such strategies are building a new configuration of energy security that is complex, politically sensitive, and not always predictable.

Added to this are economic risks manifested in high initial investments, inflationary pressures due to the increase in energy costs during the transition, social tensions due to changes in the labor market. In some countries, the energy transition has already provoked political conflicts, such as the “yellow vests” in France and protests against wind farms in rural regions of the United States. The attempt to get out of energy dependence promises freedom, but in practice forces balancing between new centers of influence. And every wrong step in this game can result not only in economic losses, but also in the loss of political subjectivity.

So the world is no longer divided into “energy dependent” and “independent”. It is divided into those who recognize the price of energy in all its complexity, and those who still play by the old rules with faith in endless resources, cheap raw materials and impunity for blackmail. But this game is already changing. Every decision in energy shows who exactly has the leverage and who only faces risks. And while some countries are looking for ways to maintain control, others are learning from scratch to build a new energy reality: more flexible, technological and unexpectedly political. In this reality, victory does not come instantaneously, because it accumulates in megawatts, infrastructural solutions, and the ability to hold back when old models collapse under the weight of new challenges.

When it became known that the transit of Russian gas through the territory of Ukraine will be stopped, a wave of alarming forecasts immediately appeared in the public space. Politicians, commentators and analysts competed in descriptions of possible catastrophic consequences: from the destruction of the Ukrainian gas transportation system to the shutdown of cities and jumps in gas prices both in Ukraine and in Europe. However, if you put aside the emotional background and turn to the facts, the situation looks completely different. Instead of an energy collapse, we are witnessing a demonstration of technical stability, political endurance, and even increased economic pressure on Russia.

First of all, despite forecasts of a possible escalation of attacks on critical infrastructure, in particular on the gas system, the Ukrainian GTS continues to work as usual. Russian shelling of energy facilities continues, but it began long before transit was halted and has neither intensified nor targeted pipelines. After the stoppage of transit, no new attacks aimed exclusively at the objects of the main gas transport system were recorded.

The claim that without Russian transit in the system there will not be enough pressure to ensure domestic consumption also does not stand up to criticism. The Ukrainian GTS has long been functioning autonomously, isolated from the supply route to the EU. The pressure in the pipelines is created by Ukrainian compressor stations, which ensure the proper supply of blue fuel to all regions of the country. This is not a theoretical assumption, but a technical fact that has been repeatedly confirmed in practice: after the termination of transit, gas supply in Ukraine not only did not stop, but also remained stable.

Another key argument, which has been widely circulated recently, is the forecast of rising gas prices for the population and industry. In reality, tariffs for the population remained at the previous level – 7.96 hryvnias per cubic meter. In the industrial sector, the changes did not become critical either: even after the revision of tariffs for the services of the GTS Operator, their share in the final price of gas did not exceed 5%. Therefore, there was no shock, either for the economy or for consumers.

As for the European market, even here the most pessimistic forecasts did not come true. Gas prices remain relatively stable. The temporary fluctuations that took place were due to completely different factors – a decline in wind generation production, cooling, rising consumption in Asia and regional crises, in particular in the Persian Gulf. The influence of the Ukrainian route on these trends turned out to be insignificant, and its termination was hardly noticeable to the market.

At the same time, there were fears about a possible restriction of trade with neighboring countries. In particular, it was about the risk of stopping the supply of electricity and goods to Slovakia. However, no restrictions or disruptions in this direction have been recorded: all logistics routes are functioning as usual, the exchange of goods and energy resources continues.

Instead, the most tangible changes occurred not in Ukraine, but in the Russian Federation. The annual loss of $6 billion in transit revenue is a blow not only to Gazprom’s budget, but also to the entire financial architecture of the Russian Federation. This monopolist is one of the main sources of filling the Russian treasury, and now it does not pay dividends to the state, asks for financial support and is under threat of further cuts. The Russian government is already preparing a decision to reduce the tax burden on Gazprom, which actually means a further decrease in budget revenues. Against this background, there is an increase in gas prices for the population and a planned double increase in tariffs for industry every year.

This result is confirmation that Ukraine is able to use energy weapons not only as an element of protection, but also as a tool of pressure. Stopping transit became a painful decision for the aggressor, but it does not exhaust the available leverage. A significant source of income for the Russian Federation is still the transit of oil through Ukrainian territory — another $6 billion every year. The export terminals in Ust-Luz and Novorossiysk are within the reach of our Defense Forces, and if the pressure on these facilities increases, Russia may lose another strategic source of funding for the war.

After the termination of the transit of Russian gas through the territory of Ukraine, the internal energy balance of the country, as well as the situation on the European markets, did not undergo critical changes. Forecasts about the technical instability of the GTS, the threat of supply interruptions, a rapid increase in tariffs, or a decrease in exports have not been confirmed. The Ukrainian gas transportation system has demonstrated the ability to work autonomously, and the energy sector has demonstrated flexibility to changes.

Instead, it is the Russian Federation that is currently facing the long-term consequences. The reduction of transit revenues, the reduction of tax revenues and the financial exhaustion of the key energy player – Gazprom – are gradually reducing the sustainability of the economic model on which a significant part of the Russian state budget is based.

This example proves that even in the difficult conditions of war, Ukraine is able not only to respond to external challenges, but also to act strategically, turning potential threats into factors that weaken the aggressor. The energy sphere remains one of the areas where our state can influence the course of a major geopolitical confrontation without losing its internal stability.