The Geopolitics of Ukraine’s Grid Interconnection Dreams Amidst the War: What to Look out for

On 24 Feb. 2022, Russia launched a large-scale military invasion in Ukraine, after the escalation of the already tense relations that succeeded in the annexation of Crimea in 2014. The invasion comes after a year that saw Ukraine growing closer to the West, primarily to the EU and secondarily to the USA, which has been evident in numerous sectors, energy is one of them. This has been ratified by actions such as the joint statement of Germany and the USA on support for Ukraine’s (and Europe’s) energy security on July 21, followed by the adoption of a law by the Ukrainian parliament, that enables the simplification of the connection process to other electricity grids. Amidst the ongoing war, Kyiv pushes even harder to complete connection to the European electricity grid, and seeks ways to diversify from Russia. Nonetheless, apart from the numerous technical issues that need to be resolved, there are a lot of geopolitical problems that, if not taken into consideration when planning the interconnection, are bound to have far-reaching ramifications for both the European and the Ukrainian grid, but also for regional stability. 

A tedious process

The Ukrainian connection to the European Electricity Grid might not seem to be a very complex technical case, but on the contrary, it is expected to add numerous challenges to the grid operators of the neighboring countries. Primarily, this translates into an obligation for Moldova to switch to the European grid as well. And despite the agreement between the two countries’ grid operators, Ukrenergo and Moldelectrica, in June 2017, to be both connected to the EU interconnection, as well as Moldova’s recent request to join the EU, the political instability in Chisinau and the uncertainty over the war in Ukraine make it very challenging for this agreement to be fulfilled. In addition, many changes will be required by Slovakia, Poland, Hungary and Romania as well, on the level of their respective national grids. Ukraine can barely manage to satisfy its own energy needs and the aftermath of the war will make the country increasingly reliant on imports, something that will require from its EU neighbors, firstly to increase their production or their own imports and secondly to make major reforms to their own power grid. Despite the current support for Ukraine, in case the neighboring countries are not consulted on the subject, this might result to friction with them because of the aforementioned increased expenses that will stem from this interconnection. Finally, reflecting on the consequences that a pro-Western policy by Kyiv already had for its national stability, living up to this policy with tangible results (such as the grid interconnection) could bring regional instability to the point of no return. 

It can be observed that in this major challenge, even technical obstacles have huge geopolitical implications for Ukraine. It is, hence, paramount to examine the pure geopolitical consequences that such a shift might have for Kyiv (and for the interconnected grid in general). 

The constant cybersecurity threat 

Cyberattacks pose a constant threat to Ukrainian security. In 2016, the Ukrainian grid was struck by the Stuxnet malware that resulted in a massive power outage throughout the country. And while the outage lasted for only an hour, researchers have asserted that this malware can easily adapt to different structures of grid and types of software and, in the long run, generate longer and widespread outages. The same malware hit many other public services in Kyiv in January 2022. It is evident that the Eastern European country has an ICT structure that is highly vulnerable to cyber threats and that is bound to affect the energy & electricity sector, especially if modernization of the grid takes place and the usage of software is prevalent in its largest part. In the case of interconnection with Europe, synchronization and harmonization (in frequency and voltage) take place, which transfers the aforementioned vulnerability in the rest of Europe as well. The current Russian aggression depicts that, even in the scenario that the war ends and stability returns in Kyiv, major reforms will be needed in its cybersecurity strategy in order to cautiously move to the integration of the two grids. 

The case of the self-proclaimed states

Together with the annexation of Crimea, in 2014, Moscow-backed separatists in Donetsk and Luhansk broke away from the central government of Ukraine and proclaimed themselves as “republics”. This is hardly something new in the region, as partly recognized states exist also in Georgia and Moldova. This formulates numerous questions, in particular to how shall the interconnection take place if both self-proclaimed states show unwillingness to comply. To add to that, it is paramount to consider the importance of the breakaway states for the Ukrainian grid. Donetsk is home to the Sieberdonetsk and the Kurakhove gas-fired power stations, comprising a total capacity of over 1500MW, whereas Luhansk also has its own set of power plants, whose power adds up to a little over 1300MW. It can be understood that, by the figures, if the two separatist regions decide on unilaterally disconnecting from the grid, it will have a devastating effect on the whole Ukrainian grid and put enormous pressure on the existing transmission lines, by increasing electricity flows exponentially or even reversing them. In the case that the grid is already interconnected to the European one, these consequences will be strongly felt by Ukraine’s EU neighbors and potentially for the EU as a whole. This fear is significantly larger if we consider the need for Moldova’s interconnection as well, where the de facto state of Transnistria controls the Kuchurgan power station, by far the largest energy infrastructure in the country, in a region heavily influenced by Moscow, both financially and militarily. 

Furthermore, separatists in the states of Donetsk and Luhansk can utilize pipelines as leverage. The Druzhba pipeline, which consists of a group of pipelines and is considered the largest in the world, passes through the city of Verhunka, in the Luhansk region. It was on February 2022 that there was an explosion in that part of the pipeline, putting the supplies towards Europe in great jeopardy. As far as Donetsk is concerned, the Kramatorksk-Donetsk-Mariupol pipeline is an essential one for a significant part of the country. As it was portrayed in February, the Moscow-backed separatists can cause major disruptive events in the energy supply, which can cause damage to the energy grid, but also to the electricity grid throughout Europe, as gas-fired power plants are paramount for European energy security.

Last, but not least, the threat of the development of crypto mining is a very important one. Partly recognized states, such as Transnistria, Abkhazia and South Ossetia have turned into havens for crypto miners due to their loose electricity regulations and extremely low electricity prices, becoming homes to the new crypto billionaires.  And while Donetsk and Luhansk have not followed the same pattern, it might be increasingly intriguing to do so, since poverty rates in the regions are rising. To add to that, on 21 February the Russian Finance Ministry submitted a draft cryptocurrency regulation, which would potentially provide clarity and favorable conditions to miners. This could prove to be a pushing factor for Moscow-based states such as the ones in Eastern Ukraine to develop their own crypto mining industry. 

Lessons learned from Georgia

Georgia’s experience can be used as a point of reference. After the war with Russia on 2008, the de facto states of Abkhazia and South Ossetia emerged, backed by the Kremlin. Despite the fact that Tbilisi’s stance is firmly against recognition of the aforementioned states, there have been agreements between both sides to use the hydropower plants that are close to the regions, such as the Enguri hydropower plant, for subsidized prices, as low as $0.01/kWh. This is a clear case of application of realpolitik by Georgia, which can prove to be useful for Ukraine as well. Provided regional stability returns and Kyiv claims full control of its land, an agreement can be reached that would ensure no disruptive events in the grid so that Ukraine can safely participate in the grid interconnection with Europe. 

How to diversify? 

The war in Ukraine poses a great threat to the country’s energy security as escalating tensions in its relations with Russia bring the risk of a gas supply halt in the future. Kyiv currently imports 10.6bcm of natural gas that will need to be replaced. This can be remedied in the short term through assistance by the EU, but reversing pipeline flows will be an enormous challenge. Another idea, provided the ship flow in the Black Sea returns to normal, could be the supplying of gas through the form of LNG. This can cover a large part of the Ukrainian gas demand. However, the current LNG ship fleet works at almost full capacity and it will be highly challenging for Kyiv to secure supply through a segment of this fleet, competing with other buyers. 

A potential ally in this could be Turkey. The discovery of a natural gas field in the region of Sakarya in the Black Sea was a major breakthrough for Ankara, as, with the current projections, it is estimated that it will be able to produce up to 3.5bcm of natural gas by 2023. The timing could prove to be great for Ukraine and Turkey can find itself a reliable buyer. Nonetheless, it might be difficult to engage Ankara, as partnering with Kyiv after a Russia-Ukraine war could have far-reaching geopolitical implications. 

Nevertheless, it is not only gas that is imported in Ukraine. Despite its large uranium production, it is a net importer of nuclear technology and its main partner is Russia. Breaking away from such a relationship will be a long process and would require different partners. An idea that is being implemented is to initially increase uranium production within the country so as to at least retain raw materials security. Other potential solutions would be to shift to new technologies, such as the Chinese Molten Sand Reactors or the thorium technology developed by India. Making such shifts, however, would be extremely costly, as it would require Kyiv to change all of the nuclear power plant fleets. It would also increase dependence on raw materials imports, as Ukraine does not possess thorium reserves. Finally, China and India themselves might be reluctant to enter a partnership with Ukraine after the Russian invasion. 

Reflection

After the recent aggression depicted by Moscow, the Ukrainian government is looking to detach itself as quickly as possible from its Russian dependence. However, this process is an extremely complex one, and the energy sector is where the complexity hits its peak. There are questions that need to be addressed, such as:

Will neighboring EU countries be fully aware and accepting of the ramifications that a Ukrainian interconnection might entail?

Is Kyiv working on a sound and resilient cybersecurity strategy before the physical interconnection?

Is there communication/engaging with the self-proclaimed republics and the de facto states in the region? Or if this is not the case, is there certainty that they can be circumvented?

If these questions can be answered, you got yourself a unified grid. The EU, together with several other regional stakeholders have to move forward very cautiously and ensure resilience and energy security for a great range of scenarios. The urgency from Kyiv’s side is fully justified, but it is in its and in Europe’s best interest to achieve a good interconnection rather than a quick one. 

[Photo by Michael Schwarzenberger / Pixabay]

The views and opinions expressed in this article are those of the author.

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