Introduction
Russia’s invasion of Ukraine in 2014 was the most critical geopolitical crisis facing world leaders at the time, according to the then UK Foreign Minister’s statement to Parliament: ‘The crisis in Ukraine is the most serious test of European security in the 21st century so far…’ (Hague Reference Hague2014). President Vladimir Putin’s annexation of Crimea as well as his gaining control over large swathes of the Donbas region has left world leaders perplexed as to what lies behind his motives. Several scholars in the field of international relations have provided different explanations regarding Russian motives. While providing the context of the invasion, though, they tend mask the underlying economic as well as resource dependency considerations. For example, Barbashin and Thoburn (Reference Barbashin and Thoburn2014) and Snyder (Reference Snyder2014) ascribe Russia’s actions to neo-colonial imperial ambitions with reference to President Putin’s comments on ‘Novorossiya’:
It should be added that what was called Novorossiya (New Russia) back in the Tsarist days – Kharkov, Lugansk, Donetsk, Kherson, Nikolayev and Odessa – were not part of Ukraine during those times. These territories were given to Ukraine in the 1920s by the Soviet government. Why? Who knows. (Putin Reference Putin2014)
However, the imperialist explanation would imply a similar behaviour with respect to other countries/regions, particularly large ones such as, for example, China or continental Europe – a much greater price for an imperialist. This has not been the case. For Zbigniew Brzezinski, President Putin’s attempt to establish a Eurasian Union ‘…is nothing but a new name for the former Soviet Union, or for the former Czarist Empire’ (Gardels Reference Gardels2014). If this were to be the case, then why have we not observed a similar approach towards other former Soviet states and Warsaw-Pact countries? The same logic can be applied to the Russian ethno-nationalist argument (Rutland Reference Rutland2014) linking traditional values and interests (Tsygankov Reference Tsygankov2015). There are significant numbers of ethnic Russians living in Ukraine, but also in Kazakhstan, Uzbekistan and Belarus, not to mention the large Russian diaspora living in the United States, Europe, Israel and elsewhere. One questions whether the imperialist argument holds in such cases. Other scholars point to Putin’s emotions and personal grievances with Western leaders (Larson and Shevchenko Reference Larson and Shevchenko2014; Tsygankov Reference Tsygankov2014), although these explanations need to account for the fact that leaders of other countries usually serve a fixed term in office and tend to ‘come and go’, while President Putin has outlasted most, if not all, of his major fellow heads of states. Treisman (Reference Treisman2014) and Mankoff (Reference Mankoff2014) draw attention to the economic problems of Russia while McFaul et al. (Reference McFaul, Sestanovich and Maearsheimer2014) discusses the role of populist politicking. However, none of these approaches explains why the annexation of Crimea and the subsequent war in eastern Ukraine would solve these issues for Russia and President Putin. A further variant sees the step-by-step expansion of the European Union (EU) and its NATO military arm into Eastern-Europe as one of the growing causes behind the war (McFaul et al. Reference McFaul, Sestanovich and Maearsheimer2014). Still, if this hypothesis could be interpreted as the direct cause behind the war, the expansion of NATO to Poland, Hungary, the Baltic States, Romania and Bulgaria would arguably have already triggered a war. In fact, one could argue that these latter states, in contrast to Ukraine, played less of a role in Russia’s strategic interests and did not pose a direct threat or formed serious competition. They had also commenced formal procedures to join the European Union in the early 1990s via the signing of association agreements and later NATO. The authors of the current article therefore see the Russian invasion and annexation of Crimea and the use of hard and soft power in Ukraine as different in the sense that here key issues and goals of Russian policy are in play. The case of Ukraine accepting an EU Association agreement, which would guarantee technical assistance, finance, technology as well the gradual reduction of barriers to trade, may have been considered as overstepping the line, or too close for comfort. Ukraine was strategically denied access to the EU and potentially to NATO by the Russian Federation (Mearsheimer Reference Mearsheimer2014). It should also be remembered that even before its invasion and annexation of Crimea, Russia had already militarily intervened in breakaway states such as Moldova and in Abkhazia and South Ossetia (Bobick and Dunn Reference Bobick and Dunn2014). The latter was the first instance of what we could call a hybrid war, while that in Crimea was the second. This perhaps suggests that there was a pattern or trend, but it was not spotted at the time. Therefore, while questions could be raised as to whether more countries could follow, further knowledge is required in firstly explaining the causes of the Russia–Ukraine war (Berzins Reference Berzins2014).
The actual causes of the war remain partially unclear for two principal reasons. First, the history of the former Soviet Union, its loss of identity and geopolitical clout following the system’s implosion at the beginning of the 1990s has played a central role in academic research. While significant in, to some extent, explaining the context behind the interventions in Ukraine, it does not directly address Russia’s underlying strategic resource gaps, which form a serious threat to the country. Second, scholars have not fully considered how Russian control over the more strategic areas of Ukraine could close the gap.
In addressing the two above points, we adopt the resource dependency theory perspective that has been used in previous research to explain interstate advantages in politics. For example, Sprout and Sprout (Reference Sprout and Sprout1957) looked at physical resources such as geography and minerals, but also at psychological factors such as the ability to perceive and react. Pfeffer and Salancik (Reference Pfeffer and Salancik2003) emphasized the role of scarce and critical resources, while Beitz (Reference Beitz1979) concurred by emphasizing resource equality as a source of peace. Reuveny and Barbieri (Reference Reuveny and Barbieri2014) analysed natural resources in terms of their interstate war potential, and Selznick (Reference Selznick1949) studied the relationship between politics and organization. Some resources are country-specific, such as location, climate, rare natural resources and fertile soil (Davidson Reference Davidson1980). The resource dependency theory provides a structure to address key questions in respect of: what resource gaps does Russia have? Which Ukrainian energy resources can close Russia’s resource gaps? What resources may Russia seek to establish strategic denial of? Where in Ukraine are the energy resources located? What are the implications for policy and international business? Hence, the theory enables the geographical areas in Ukraine that may be of interest to Russia to be identified.
The central premise of this paper is that President Putin’s invasion of Ukraine was motivated by the Russian Federation’s need to maintain its access to and/or supply of critical resources from Ukraine. To ensure this, as well as that of Russia’s future economic survival, would necessitate the strategic denial of these resources to other countries and thus prevent them from competing with Russia or on the Russian market itself. The argument assumes that a key government objective is the survival of its nation state and that this responsibility overrides all other issues. The following four hypotheses constitute the resource dependency theory approach used in our case study:
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(1) Russia has a gap in its resources critical to its survival.
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(2) Ukrainian resources can fill or mitigate Russia’s resource gaps.
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(3) The resource gaps are in the energy markets and energy resources.
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(4) Russia attempts to protect its interests through the strategic denial of resources.
The resource dependency theory approach employed in this work entails an empirical investigation of independent variables – i.e. energy resources and markets, to explain Russian government actions – the dependent variable. The first criterion for selecting the independent variables was that they must pose a serious threat to Russia and, second, Ukraine’s resources can close or significantly mitigate Russia’s resource gaps.
Noteworthy is that critical resources are not limited to political and military power, but also comprise economic resources and money, as noted by Ukraine’s Ex-President, Kuchma: ‘…there is not only an ideology and the protection of Russian-speakers behind it [the war in Ukraine], but also very big money is involved here -- there is no doubt about it’ (Kuchma Reference Kuchma2014).
The empirical thrust of this article is to:
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(1) Identify Russia’s energy markets as well as the resources gaps that could potentially pose serious threats to the country;
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(2) Identify Ukraine’s energy markets and resources that can fill or significantly mitigate Russia’s resource gaps that are of potential competitive threat to Russian energy exports;
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(3) Examine Russian government actions undertaken to close the resource gap.
While we maintain that the resource dependency theory better explains Russia’s actions in Ukraine in contrast to those forwarded by authors cited at the beginning of this article, this research does not exclude that other valid explanatory variables could play a role in addition to our own. The key premise here is that energy markets and energy resources gaps are the most important explanatory variables in the equation. Indeed, many international energy studies consider energy as the key factor in international relations. However, the approach does have its critics. Belyi (Reference Belyi2016) for example provides a good overview of the limitations of resource determinism in international relations.
Critics may also argue that Russia has plenty of energy resources, so the dominance of Ukraine’s energy sources is not an issue. However, as Colgan (Reference Colgan2013) explains, the risk to current market domination, in this particular instance Russia’s domination of the EU gas market, could be a causal pathway to conflict. Others may cite Putin giving other reasons for the Crimea invasion but it should be remembered that deception is a part of politics and war, and that there is no need to give more credibility to Putin’s statements in this regard than to his repeated denial that the forces in Crimea were regular Russian Federation forces, statements that history has proven false.
The Euromaidan revolution in Ukraine threatened Russia’s control of Ukraine’s energy markets and energy resources. Thus, when Russia was faced with a plausible loss of these resources to the European Union, a Russian invasion became inevitable. EU control of Ukraine’s resources would deny them to Russia and, if supported and developed by EU finance and technology, would pose a direct competitive threat to Russia’s energy exports. For this reason we argue that Russian control of both Ukraine’s energy markets and resources for its own use and their strategic denial to the EU was the key motive for Russia’s aggression towards Ukraine. The actual economic, business and strategic motivations for the war have received little in the way of direct attention, though Biersack and O’Lear (Reference Biersack and O’Lear2014) do link Russian nationalism, identity and energy politics with foreign policy in Crimea as well as the geopolitical shift to the east in Russian foreign policy – namely, with China with whom the country now has a ‘strategic partnership’. The research carried out by the latter two authors does provide significant insights as to the more ‘indirect’ or ‘silent’ causal factors behind the annexation of Crimea and the war in Eastern Ukraine. Therefore, in addition to our own propositions explaining the Russia–Ukraine war, this work will also include some of the milestones in political developments before the war. This digression is necessary since, while this work considers the underlying economic and resource issues to be central and the primary cause behind the war, the actual background political behaviour provides the context. We will now turn to the theoretical section of this work.
Theory and Methods
This section discusses and describes the main theory and methods used in this article and starts with a general review of the theoretical framework underlying the study.
Theoretical Framework
Although previous studies on the reasons for the Russia–Ukraine 2014 war, cited above, shed some light on to the plausible explanations for the conflict, they have their limitations. A number of them do not provide a theory, based on testable hypotheses, that fully incorporates the role of energy markets and energy resources in the Russia–Ukraine war. In fact, few scholars have directly investigated the role of energy resources and energy markets in this conflict. Those scholars that have focused on the role of energy resources have argued that only energy contextual factors and not issues of energy markets or energy resources themselves caused the conflict (Van de Graaf and Colgan Reference Van de Graaf and Colgan2017). Some point to the limitations of resource determinism in studies on energy and conflicts (Belyi Reference Belyi2016), while Stulberg (Reference Stulberg2017) argues that energy and energy markets act as a strategic restraint for Russia, Ukraine and the European Union. Still, for instance, Lee (Reference Lee2017) argues that historically gas has been the main reason for conflicts between Russia and Ukraine. Drawing on concepts developed by Colgan (Reference Colgan2013) we identified four causal pathways as playing a role in the Russia–Ukraine war: Ukraine energy resources; Ukraine’s internal energy market and Ukraine’s potential to challenge Russian energy domination in the EU; Ukraine’s gas transit routes for Russian gas; and Ukraine’s and the European Union’s dependence on Russian gas (Colgan Reference Colgan2013).
Research Setting
The objective of this study is to explain why Russia attacked Ukraine. To achieve this objective the paper uses an explanatory qualitative case study approach (Yin Reference Yin1981, 61; Ghauri Reference Ghauri2004; Ghauri and Grønhaug Reference Ghauri and Grønhaug2005, 196). Qualitative case studies have a long history in organizational and international relations literature. Allison (Reference Allison1971), Pressman and Wildavsky (Reference Pressman and Wildavsky1973), Ferrier (Reference Ferrier2001), Levy (Reference Levy2008), Lee et al. (Reference Lee, Song and Kwak2014) and all studies cited in our introduction (Barbashin and Thoburn Reference Barbashin and Thoburn2014; Snyder Reference Snyder2014; Rutland Reference Rutland2014; Larson and Shevchenko Reference Larson and Shevchenko2014; Tsygankov Reference Tsygankov2014, Reference Tsygankov2015; Treisman Reference Treisman2014; McFaul et al. Reference McFaul, Sestanovich and Maearsheimer2014; Mearsheimer Reference Mearsheimer2014; Smith Reference Smith2015) are in essence qualitative studies. Having reviewed these studies and collected evidence for a reconnaissance study, the facts support the resource dependency theory perspective, which could then be used as a guide for further evidence. Hence, to develop the argument further, it became necessary to deductively depart from the resource dependency theoretical proposition and use empirically grounded interpretations of the evidence related to Russia’s resource gaps. This involves providing alternative explanations of the evidence in relation to Ukraine’s resources and to form a conclusion based on the analysis and evidence as suggested by Yin (Reference Yin1981). However, this approach has its critics (Bryman et al. Reference Bryman, Bresnen, Beardsworth and Keil1988, 81), especially for example in terms of replicability (Lee et al. Reference Lee, Mitchell and Sablynski1999) and reliance on single methods of data collection (Bryman Reference Bryman2004). To control for any bias in data collection, interpretation and findings, critical peers were asked to review earlier drafts of this article and to offer alternative sources of evidence and explanations related to those provided by Yin (Reference Yin2013). Their opinions were considered in the final version of this article.
Sources of Information
For this article we used a spectrum of documents and archival records from the public sphere, including journal articles, media reports, websites, government databases and publications. To validate the information obtained, we triangulated data by corroborating evidence from multiple sources in each field. The resource dependency theory lens was used to guide the selection of evidence on resource gap variables – based on two criteria: first, the resource gap variable must present a serious threat to Russia, and, second, Ukraine’s resources must fill or significantly mitigate the resource gap. Certainly, there may be other relevant resources but limitations of scope press for a selection of the most important resources that meet the criteria. The following section provides the results of these findings.
Results and Discussion
In this section we will first provide a brief background discussion of the Russia–Ukraine war as mentioned earlier, listing the main milestones in the development of the conflict as it demonstrates that the conflict has been ongoing for years rather than erupting spontaneously. The section will then illustrate Russia’s resource gaps in terms of energy markets and how Ukraine’s resources fill, mitigate or potentially compete with them. Here, we argue that Russia is dependent on the Ukrainian energy market for much needed revenue and strives to protect this market while simultaneously ensuring its control over Ukrainian energy resources in order to prevent any potential competition to its own gas exports to Europe (see also Perlez Reference Perlez2014). The section identifies five main issues in resource dependency: Ukraine’s energy market; Ukraine’s proven gas reserves, particularly in the Black Sea near Crimea; Ukraine’s proven coal reserves; Ukraine’s nuclear energy production and uranium reserves; and finally Ukraine’s energy transit system. Both countries consider these issues critical to their survival. Hence, when Ukraine threatened to join the European Union, which would give Ukraine access to technology and finances to exploit and market these energy resources, Russia proceeded to invade Ukraine. We argue that this is the central and direct cause behind the Russia–Ukraine war. We will first however digress and discuss the main political milestones in the Russia–Ukraine conflict from 2005 onwards.
The Background of the Russia–Ukraine War
At the time of writing, the ongoing Russian–Ukrainian war is fundamentally economic, and to a lesser extent political. After the fall of the Soviet Union and the Warsaw Pact, many Central European states as well as the Baltic republics joined the European Union and NATO. Consequently, the Russian Federation was in a very troublesome economic and political situation. After his takeover of power in 2000, President Vladimir Putin tried to remedy the situation, concentrating first on the consolidation and economic modernization of the country. This move was supported by Moscow’s quasi-monopoly as the main supplier of natural gas to both Western and Central European countries as well as to the former Soviet republics. At the same time, Putin attempted to create a Euro-Asian Economic and Political Community as a counterweight to the European Union (EU). These attempts ended in failure, although more recent research (Biersack and O’Lear Reference Biersack and O’Lear2014) highlights the growing importance of Euro-Asian economic relations in Putin’s future geopolitical plans, confirmed by the 30-year energy agreement signed between the Russian Federation and the People’s Republic of China in 2014.
The occupation of Crimea and the armed conflict in Donbass do not necessarily represent two different economic and political objectives of the Russian Federation. In the case of Crimea, it should be noted that – contrary to what some have argued – the peninsula’s annexation was not directly connected with securing access to Sevastopol for Russia’s Black Sea Fleet, since both Ukraine and the Russian Federation signed the ‘Kharkiv Accords’ in 2010, providing access until 2042. However, the significant oil and gas reserves on the Crimean Black Sea Shelf represented a great threat to Russia’s gas exports to Europe because of their magnitude, proximity to established pipeline networks, and short transport distances. The rebellion of pro-Russian elements in Donbass, and the region’s self-proclaimed secession from Ukraine, caused the economic and political destabilization of Ukraine. The Donbass Basin is the industrial heartland of Ukraine, where its main heavy and energy intensive industries are located as well as enormous coal reserves. An economically and politically successful Ukraine with pro-European and pro-Atlantic aspirations could be a contagious example for members of the Russian Federation as well as for post-Soviet Asian republics. Between 2005 and 2014 the following significant events preceded Russia’s invasion of Crimea and the civil war in Donbass:
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2004/2005. falsified election of pro-Russian President of Ukraine, W. Yanukovych, and the ‘Orange Revolution’ in Kiev;
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2005–2010. Pro-European and Pro-Atlantic course of Ukrainian President, Viktor Yushchenko;
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2005. Russian–Ukrainian ‘gas war’;
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2008. NATO/Russia meeting in Bucharest, Russia opposes plans for Georgia’s and Ukraine’s cooperation with NATO;
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2008. Russian–Georgian war, Russia annexes the Abkhazia and South Ossetia ‘republics’ and prevents Georgia from converging to European structures;
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2010. Ukraine and Russia sign an agreement to extend the stationing of the Russian Black Sea Fleet in Sevastopol for 25 years;
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2013. Ukraine is negotiating an association with the EU;
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2013. Russia drastically increases customs duties on Ukrainian goods, the collapse of Ukrainian exports to Russia;
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2013. Parliament of Ukraine suspends negotiations on association with the EU;
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2013–2014. ‘Euromaidan’ in Kiev, several hundred thousand protest in Kiev;
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2014. Street fighting in Kiev, special police, ‘berkut’, open fire on demonstrators – hundreds killed and wounded;
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21 February 2014. President of Ukraine Viktor Yanukovych escapes to Russia;
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1 March 2014. Russia invades Crimea;
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17 March 2014. The Autonomous Republic of Crimea announces its independence and organizes a referendum on the affiliation of the Crimea to the Russian Federation;
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2014. Pro-Russian separatists proclaim self-proclaimed republics Donetsk and Lugansk;
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2014. Ukraine authorities launch ‘Antiterrorist Operations’ against separatists in Donbass;
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August 2014. Counter-terrorism in Donbass with armoured units of the Russian Federation;
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2014–2017. Bloody conflicts, destruction and escalating war in Donbass.
In the media and in the literature, the Russia–Ukraine conflict has received much interest from a political point of view but perhaps the most serious limitations of the literature cited above concern the underlying economic reasons. The two points which emerge from the analysis thus far are, first, that Russia opposes the notion of an energy competitor on its southwestern border, and, second, that Russia does not want to lose Ukraine as its largest customer for natural gas, but one which is also richly endowed with natural resources. This is a key feature in Russia’s long-term aims to remain a key international player in the supply of energy and resources, which is a precondition for ensuring that its geopolitical goals are fulfilled.
Russia’s Resource Gaps and How Ukraine’s Resources Fill or Mitigate Them
In the following, we turn to the evidence for our findings that the Russian Federation has resource gaps in energy markets, energy, and gas transport infrastructure.
Energy Market and Resources
Prior to the Russia–Ukraine crisis, Ukraine was Russia’s largest gas customer. Ukraine bought 50+ billion cubic metres (bcm) of gas from Russia annually, equal to one third of Russia’s European exports of 146 bcm in 2014. At $247 per thousand cubic metres (tcm) this is a market of $12.3 billion annually (Gazprom 2015b). Ukraine’s gas purchases from Gazprom dwarf those of Germany, Russia’s second largest customer with purchases of 38.7 bcm in 2014. However, Russian animosity towards Ukraine is so great that Gazprom does not recognize Ukraine as an international customer and states on its webpage: ‘Germany has been, and remains, the largest buyer of Russian natural gas. Its total import volumes in 2014, including resale, came to 38.70 bcm’ (Gazprom 2015a). It is possible, given the events of 2014, that Gazprom considers Ukraine to be a domestic market.
Since the start of the crisis, Ukraine claims to have initiated energy efficiency measures to reduce imports from Russia to 42 bcm in 2014 and a planned 35 bcm in 2015. This concurs with its imports of gas from Poland, Hungary and Slovakia at this particular time (see below). However, the so-called energy efficiency drives are really rationing measures. For example, most streetlights have been turned off in Kiev and other cities. To save energy, schools started a month later than usual in 2014. Rolling electricity blackouts have been implemented and district heating, which most city residents rely on, has been rationed. Moreover, the loss of Crimea and the industrial Donbas region also reduced the need for gas imports from Russia. Although Gazprom claims to have supplied 0.7 bcm of gas to Donbas in the first half of 2015, Kiev refuses to pay for it (see below). A reversed flow of 6 bcm from Europe helped the situation as well as the use of gas reserves (NGE 2015). The extent to which the Ukrainian government managed to maintain the supply of lighting and heating during the winter seasons has been explained by purchases from suppliers in Europe, though one questions whether these are simply paper transactions given that Europe is a net gas importer from Russia. However, following the annexation of Crimea and subsequent war in eastern Ukraine, energy security became a key priority for the European Union and for NATO (Clowes Reference Clowes2018). As such, ‘reverse flow’ systems were fitted to transit gas supplies to ensure that member states could actually redirect gas flows to other countries in the event of shortage or emergency. This system provides a temporarily effective fall-back mode, while seeking out alternative suppliers – should the situation arise. Russia’s need to protect its largest customer, while at the same time denying other potential players access to its resources, became a priority as Ukraine intensified its efforts to become a member of the EU and possibly of NATO. Russia found it necessary to protect its most critical market as well as prevent potential energy resources from slipping out of its control.
Crimea and Gas
A great deal has been written about the strategic importance of Crimea to the Russian Black Sea Fleet with respect to its need to be able to protect transport routes to and from southern Russia and the South Stream and Blue Line pipelines. However, on 1 March 2014, there was no threat to Russia’s bases in Crimea so the motivation for the invasion of Crimea must have been different. From the resource dependency theory view, the main reason for the invasion is the discovery of enormous gas fields in the Crimean and north-western part of the Black Sea near Crimea. The Black Sea discoveries have the potential to render Ukraine independent of Russian gas supplies, resulting in a Russian resource gap in terms of gas markets and foreign currency. Additionally, Black Sea gas has the potential to threaten Russian gas supplies to Romania, Bulgaria and Hungary via direct competition, since Ukrainian gas has a competitive advantage due to its access to an established pipeline network and short transportation distance. The Russian annexation of Crimea tempered Ukraine’s hopes for energy independence gained from newly discovered energy fields in the Black Sea. Hence, the annexation secured the market for Russian exports to Ukraine and, in the same move, eliminated a potential competitive threat to Russian gas supplies to Europe from Ukrainian energy fields in the Black Sea, which have the potential to be one the largest offshore energy bonanzas in history (ICM—PETROLEUM-MANAGEMENT 2012). However, the annexation of Crimea did not prevent Ukraine from developing other gas reserves and the strategy of Naftogaz is to achieve self-sufficiency in gas, stop gas imports by 2020, and then to steadily increase gas exports to the EU in the following years. Naftogaz has received $800 million in financing from the European Bank for Reconstruction and Development (EBRD) and World Bank to develop Ukraine’s gas resources (Kobolyev, Reference Kobolyev2017). The former of the two institutions actively invests in Ukrainian infrastructure and also into solar power technology (Government Portal, Ukraine, 2018).
According to Prime Minister Groysman, Ukraine ranks as the world’s second or third in gas deposits (Groysman Reference Groysman2017), suggesting that Ukraine’s competitive threat to Russia’s in respect of gas exports to Europe is substantial. In March 2018, the gas dispute escalated to a new level after Stockholm arbitration ruled in favour of the Ukrainian gas firm Naftogaz and ordered Russian Gazprom to pay $2.5 billion in damages. Russia responded by suspending all deliveries to Ukraine and threatened to halt all deliveries to Western Europe, which, at that time, was receiving 194 billion cubic metres of gas from Gazprom, of which 93.5 bcm were transported via Ukraine, according to the Reuters News agency.
Coal Reserves
Ukraine has the seventh largest volume of proven coal reserves in the world with an estimated 33.9 billion tons. Some of these potentially rich coal areas, such as the central lignite reserves in the Dnipro coal basin, have not yet been accessed. At early 2015 market prices the value of the proven coal reserves exceeded two trillion dollars. Historically, the importance of Ukrainian coal to the former USSR was enormous, as Ukraine produced 80% of USSR total coal production, at 117 million tons in 1940. After the Second World War, Ukrainian coal production reached 115 million tons in 1955 and peaked at 218 million tons by 1976. Ukraine produced half of the former USSR’s total coal output after the Second World War. Following independence, production stood at 128 million tons in 1992. By 2012, Ukraine produced only 65.6 million tons of coal and consumed 74.3 million tons (Gordon Reference Gordon1987, 53; Razumkov-Centre 2003). Ukraine’s coal production was about the same as that of Germany in 2012, at 68.7 million tons (EUROCOAL 2015b).
However, the loss of 65 coal mines in the Donbas coal basin drastically curtailed coal production to a total of 15.5 million tons in the first six months of 2015 and reduced coal inventories to only 1.5 million tons, which is only a week’s consumption under normal circumstances. The situation is critical since 38% of Ukrainian electricity is generated by coal power plants that consume 3.5 million tons monthly, and most residential district heating stations are coal fired. The situation improved somewhat for the remainder of the year as total coal production reached 39 million tons overall in 2015 (EUROCOAL 2015a; Interfax-Ukraine 2016; Varfolomeyev Reference Varfolomeyev2015). Paradoxically, this precarious situation forces Ukraine to buy coal from its enemies. Coal is supplied to Ukraine by Russia, and Kiev has been forced to buy coal from the occupied territories, with plans to purchase a further 800,000 tons per month (TASS 2015; Ukrainian-Metal 2016). The conflict, however, has forced Ukraine into importing coal from other countries such as Poland and the United States following disruptions in supply from Russia (Walker Reference Walker2019). The purchase of coal from Russia is not the only paradox for the government in Kiev. Coal is being extracted from Donbass, exported to Russia, and then resold to Kiev (OSCE 2015). By 2017 the situation had worsened as coal imports nearly doubled in the first 9 months, with 55.7% of the imports coming from Russia at a price tag of $1.2 billion (UAWire 2017).
Nuclear Energy
Nuclear power provides 49% of Ukraine’s electricity, which is produced in four power plants by state-owned Energoatom (NNEGC). The first nuclear power plant was commissioned in 1977 and Ukraine’s nuclear power industry and related support industries were well established. JSC Turboatom is one of the world’s leading steam turbine manufacturers. Energomashspetsstal (EMSS 2015) produces large pressure vessels for nuclear power stations. Nuclear research and development are conducted at three research centres. As of 1 January 2013, Ukraine’s uranium reserves stood at 223,000 tons. They include the largest uranium ore deposits in Europe. Approximately 60,000 tons of the uranium can be economically mined at $80 per kg, which makes these deposits worth trillions of US dollars. The remaining reserves can be economically mined at uranium oxide prices of up to $260 a ton. However, given that market prices in August 2015 stood at $81 per ton, this makes it uneconomical to mine these resources. However, the fact that uranium oxide prices stood at $300 a ton in 2007 suggests that these resources may become economical to mine in the future. Additionally, Ukraine is estimated to have half a million tons of undiscovered, prognosticated and speculative uranium resources. Although world uranium production reached an equilibrium in 2013, by reprocessing uranium intended for nuclear weapons, demand is likely to exceed supply by 2022 (OECD/NEA 2014, 125, 423). Oddly enough, Russia is the largest re-processor of weapons-grade uranium for reactor fuel, and Russia was the recipient of all weapon’s grade uranium from Ukraine’s 5000 decommissioned nuclear weapons. A tripartite agreement between the presidents of Russia, the US and Ukraine, signed 14 January 1994, stipulated that the uranium from Ukraine’s 5000 nuclear weapons should be reprocessed in Russia and then shipped back to Ukraine free of charge for use in Ukraine’s nuclear power stations as compensation to Ukraine for surrendering its nuclear weapons. The cost of transport and reprocessing the uranium was to be paid by the US. How much of the nuclear fuel has been delivered by Russia is not clear and currently Ukraine is short of uranium fuel for its nuclear reactors.
In comparison, Russia has 687,200,000 tons of assured and inferred uranium reserves with 2870–3560 tons mined per year since 2004. This is supplemented by the production of more than 7000 tons in Kazakhstan. Additionally, Russia has 452,000 tons of prognosticated and speculative uranium resources (OECD/NEA 2014, 359). All these uranium resources appear to be substantial in comparison with Ukraine’s resources. However, only 43,000 tons of the Russian uranium resources can be economically mined at $80 per ton, compared with Ukraine’s 60,000 tons, and this fact changes the picture completely.
Ukraine uses 1800 tons of uranium per year compared with Russia’s 3800 tons. However, only 1000 tons of the needed 1800 tons of uranium are mined and processed in Ukraine and the Achilles heel is that the fabrication and final processing of uranium is done in Russia. Hence, this makes Ukraine completely dependent on Russian fuel for its 15 nuclear reactors at a cost of $601 million in 2013 (China.org.cn 2014). Attempts to secure uranium fuel supplies from Westinghouse in the USA have not been realized since nuclear reactors in the US have different fuel specifications, making the fuel difficult to use in Ukraine’s reactors. Furthermore, the United States is also highly dependent on uranium fuel supplies from Russia. Thus, the US cannot afford to supply Ukraine. China has offered to provide Ukraine with suitable uranium fuel, but nothing has been delivered (Ukroboronprom 2015; WNA 2015a, 2015b). In 2017, discussions were underway between Ukraine’s Ministry of Energy and Coal and the China National Nuclear Corporation for the production – that is, full refinement – of nuclear fuel in Ukraine (Ovcharenk Reference Ovcharenk2017).
Gas Pipeline Transport
The Russian gas company Gazprom delivers the lion’s share of its gas exports to Europe via Ukraine, and Russia’s dependence on gas transit through Ukraine increased by 19% in the first 10 months of 2017 to 77.4 billion cubic metres (UNIAN 2017). This gas transit cost Russia $926 million for the first 9 months of 2017. Ukraine has since introduced new tariffs on the transport of gas, raising the costs of transit from Russia to Europe. This will allow Kiev to secure up to $15 billion in earnings over a period of five years from the end of 2019 (Euractiv 2019).
Conclusion, Implications and Future Research Directions
The Russia–Ukraine war is an empirical case study to establish the causal relationship between resource dependency theory and government policy, including war. This study has remediated this problem by using resource dependency theory to shed light on the underlying economic and business causes of the Russia–Ukraine war. We illustrated that the Russia–Ukraine war was is caused by two crucial issues. First, Russia’s dependency on energy exports to Ukraine and, second, Ukraine’s considerable energy resources, which are a potential competitive threat to Russia’s energy exports to EU countries. These two issues are of economic and strategic importance to Russia and changes in access or management over these resources could have proven to be a barrier to its long-term goals and geopolitical shift to the East. Furthermore, Ukraine, with its heavy industry, resources and large population, is a very large energy consumer, and Ukraine uses energy in quantities comparable with those used in Germany – the largest economy in Europe. Hence, Russia, in the wake of Ukraine’s preparatory steps towards EU membership – not to mention NATO membership – needed to take precautionary measures to prevent the Ukrainian energy market from slipping out of its control, while at the same time ensuring that Ukrainian gas, coal and nuclear energy resources do not become alternative energy sources for the European Union. The actual association agreement offered by the European Union would provide Ukraine with access to financial resources, new technology for industrial modernisation and restructuring and technical expertise. This would allow Ukraine to independently manage and develop its substantial reserves of energy resources with the help of the West, which would represent a very serious threat to Russia’s economic success and long-term strategic goals. We believe this explanation to be a more ‘direct fit’ for the cause of the Russia–Ukraine war than those proposed by other scholars cited at the beginning of this article (Lee Reference Lee2017; Stulberg Reference Stulberg2017).
The empirical findings support the two hypotheses of the resource dependency theory approach and give legitimacy to the theory’s explanatory ability. In a nutshell, the Russian Federation has critical resource gaps in energy markets and is heavily dependent on energy exports. Furthermore, Ukraine’s resources, in terms of being the largest buyer of Russia gas, fills or significantly mitigates Russia’s need for energy markets and the resulting revenue. Moreover, Ukraine’s substantial proven energy reserves are a strategic threat to Russia and the latter needs to strategically deny these resources to the European Union. Consequently, Russian government actions in Crimea and Donbass corresponded to the theory’s suggestion that a government takes actions to secure resources critical to its existence. This causal pathway meets two of Colgan’s conceptualizations of resource wars and risk of market domination (Colgan Reference Colgan2013).
The domino effect of the scenarios discussed above is that Russia is likely to attempt to gain control of more geographical areas where Ukrainian key energy markets and proven energy reserves are located. The geographical areas likely to be of interest to Russia are the areas east of the river Dnieper, in which two-thirds of the Ukrainian population live (Ukrstat 2014) and where Ukraine’s main energy-demanding industries are located. The specific areas of interest to Russia are Ukrainian districts east of the river Dnieper with large-scale industrial complexes, and mining and energy resources. The Black Sea coastal district of interest to Russia is Crimea for its vast reserves of offshore and onshore natural gas and oil.
In respect of the gas pipeline networks in Ukraine, while important for Russia, it is possible to assume that these, while not under the latter’s control, will not be a source of dispute since the transit routes in Ukraine, through which the lines run, will be in a position to earn revenue. For example, in the first 10 months of 2017, Ukraine earned US$923 million from transporting Russian gas, one sixth of Ukraine’s state revenue in 2016. In the meantime, the construction of the Nord Stream 2 from Russia to Germany, as well as the South Stream and TANAP pipelines, will reduce Russia’s dependency on Ukraine’s pipeline network. In sum, while new pipelines can be built and old ones bypassed, such as in the case of Nordstream 2, oil and gas reserves (Crimea) require more of a defence and this tallies more closely with Colgan’s causal pathways from energy to conflict.
This more closely explains Russia’s potential resources gaps and its annexation of Crimea, but also the war in Donbass where much of Ukraine’s resources are located.
The key premise that the Russian aggression in Ukraine is motivated by Russia’s gap in critical resources, and that control of Ukraine bridges the gap, has not received the attention that it deserves in the literature as well as in the public media. Therefore, we may need to refocus our thinking about the Russia–Ukrainian war and perhaps wars in general to include long-term geopolitical shifts as well as future economic and business-orientated perspectives. Hence, war, such as that described in this research, is an extension of economics and business. This conclusion also reflects on the statement provided by President Kuchma: perhaps war is business!
Such conclusions have implications for theory, economics and business. The theoretical contribution of this study shows that resource dependency theory can contribute significant insights into the underlying causes of the Russia–Ukrainian war and shed light on the aggressor’s strategic intent and actions. This finding suggests an increase in the influence of resource scarcity in government policy in international relations, which is characterized by conflicts and wars fought over fundamental resources such as energy, energy markets and critical industrial capacity.
The implications for future research are that resource dependency theory can be used for analysing other conflicts around the world, such as the Syrian war or China’s actions in Asia. A resource dependency theory analysis focusing on future economic and energy relations between the Russian Federation and China as well as on Russia–EU conflicts would appear to be particularly fruitful. This may be of particular interest, especially if one considers the plausibility of a merger of these combinations as opposed to a division or war between them.
The implications for the Ukrainian government are such that it needs to ensure and make it clear that resources under threat will be denied to Russia by defence or destruction.
The implications for international business are different. Ukraine’s resources are important to international business too. Ukraine’s energy resources could decrease Russia’s stranglehold on many EU energy companies. Consequently, businesses have a tremendous opportunity to acquire key energy resources in Ukraine at a time when low market values and low exchange rates prevail. Yet, the long-term potential of a free Ukraine is gigantic for businesses willing to take the gamble. For those who do decide to invest the upside potential is enormous. There are few countries in the world as rich in critical energy resources as Ukraine, and this in a country located next door to the large European market.
A key theoretical limitation of this study is its unique focus on applying resource dependency theory to an analysis of the Russia–Ukraine war. Although this provides an insight of considerable merit, the theoretical validation of the application of this approach to the analysis of war needs to be validated with a longitudinal study of multiple wars.
About the Authors
Jokull Johannesson is a professor of strategy at the University of Agder, Kristiansand Norway. His teaching and research interests are in the fields of strategic management, strategic studies and global strategy. He has held lectureships at universities in the USA, UK and Taiwan. Prior to his academic career, he combined his entrepreneurial activities in industry with consultancy in business strategy and organizational development to private-, public- and international organizations. He has published more than 80 articles, book chapters and conference papers in international journals and conference proceedings in the USA, UK and Asia.
David Clowes obtained his PhD from the University of Glasgow and his habilitation from the Cracow University of Economics in Poland. He holds visiting professorial positions at the University of Applied Sciences, Vienna, Austria; Jiangxi University of Finance and Economics, Nanchang, China; Zhejiang Gongshang University of Finance and Economics, Hangzhou, China. He is also a Visiting Professor and Erasmus Exchange Scholar at the University of Agder, Norway. Clowes has multiple publications in national and international journals. His most recent book is titled: The Economic and Security Challenges Facing NATO’s EU Member States.
