>>2878141All of our problems with the EU started after Putin refused to ratify the Energy Charter. That charter envisioned a system similar to the 2016 Naftogaz model, where production, transportation, storage, and distribution are four separate entities (in technical terms – unbundling), and access to the main gas transit system would be granted to Turkmen, Azerbaijani, Kazakh, and even Polish gas from Świnoujście. The idea was that these players, to curry favor with the European authorities, would lower prices, allowing Europeans to buy cheap gas and oil at $30–50 a barrel, just like in the glory days of the 1990s when the West reveled in its unipolar dominance.
Once ratification was rejected, and Gazprom began systematically expanding its presence by acquiring capacity and distribution networks in the EU, with oil consolidated under Rosneft, Khodorkovsky whisking away his assets, and Nevzlin hiding in Israel, the EU launched its first gas war. The narrative was that the Russians had become unreliable and were abusing their monopoly position. This laid the groundwork for: a) moving away from the old transit scheme that allowed unlimited transit through Ukrainian gas infrastructure to the EU; b) the foundation for the Third Energy Package; and c) the theoretical justification for the Gas Directive, which imposed a 50/50 ownership and pumping split on pipelines and tried to force suppliers into price competition through discriminatory access to Russian gas transit infrastructure.
Then came the second gas war, the arbitrary cancellation of South Stream, the difficult but ultimately successful launch of Nord Stream 1 (based on Soviet-era surveys), the OPAL regulation, Gazprom's acquisition of distribution networks, storage facilities, gas stations, and refineries in Bulgaria and Serbia – and a lot more. But the EU had already declared that it wanted gas cheaper, ideally for free.
After that came arbitrary lawsuits, Stockholm arbitrations, retroactive gas directives, antitrust actions in Poland, bans and obstacles to Nord Stream 2, and attempts to derail TurkStream. When it became clear that the transit system was pumping, TurkStream was pumping, Nord Stream 1 was pumping, and Nord Stream 2 was nearly finished, they dropped the first tactical nuclear bomb: the Stockholm arbitration ruling that invalidated the contract price.
Gazprom swallowed that and managed to substitute volumes, after which the EU introduced the Gas Directive, effectively burying the system of long-term oil-indexed contracts in favor of exchange-based pricing. The result was disastrous – record high gas prices during the peak of COVID, and the only time gas dropped to $37 per thousand cubic meters for two months, which made Ursula von der Leyen practically swoon with delight.
Then it turned out that all of that was in vain, and prices shot back up uncontrollably. It was exactly then, two years before the special military operation, on a stream featuring Russian and Ukrainian energy experts – Martsinkevich, Zemlyansky, and Marunich – that they discussed what Europe would do with its gas supply if the system were disrupted. A tipsy Martsinkevich (known as Netesak) said that in the past, such conflicts were resolved by war. The stream fell into dead silence…
You could hear the proverbial sphincters clenching, lighters flickering, the hum of gas flowing through 700–1153 mm pipelines, and palpable fear. But the fear subsided, and everyone let it slide to avoid escalating tensions, until the EU rolled out billions in antitrust claims against Gazprom and filed $300 billion in WTO claims against Russia over government procurement market protections. Then came the special military operation, into which the EU eagerly plunged, dreaming of free oil at $17 a barrel and gas at $23 per thousand cubic meters – all while Khodorkovsky would be great again, decolonization would happen, Russia would collapse, Ursula would rejoice, Kaja Kallas would tear Bismarck a new one, Josep Borrell would be on Epstein's island and nobody could catch him, Trump would be sitting around, everyone would be sitting around, global domination by the Global South would be established, and China would withdraw from the market.
So what's the point of all this? The Ukrainians simply turned out to be the only fools ready to die for the realization of the Euro-American ambitions outlined above. The details don't matter. For a smile from their Western benefactors, Ukrainians die – and they're okay with that.
In a nutshell – there were many corrupt schemes that enriched elites on both sides at the expense of the Russian budget. Until 2005, Ukrainians received gas at 50% of the European price (3–4 times cheaper). They lived lavishly on that; their entire metallurgical industry and energy sector ran on cheap gas, which in turn made their steel and electricity exports to Europe cheaper. But Ukrainians also wanted permission to RE-EXPORT Russian gas bought at $50 to Europe (where it sold for $200+). Gazprom was appalled and clashed with Ukraine for the first time in the winter of 2004–2005.
Ukrainians were offered a new contract at 230% of the old price, they refused to sign, and gas was cut off on New Year's Eve. But after a couple of weeks, they managed to negotiate a very murky and corrupt deal at $95.
The next time, in 2008, after more corrupt maneuvering involving Tymoshenko, they pushed through a market-based price. This was a win for Gazprom, but Ukrainian industry immediately struggled and began to decline. Ukrainian gas consumption fell by 5,000 billion cubic meters.
Finally, under Yanukovych, they secured a 50% discount off the market price in exchange for extending the lease on Sevastopol. After that, metallurgy began to revive slightly. Then came 2014, Crimea, and the Ukrainians officially refused Russian gas (though in reality they still took it from the pipeline, they just bought it from Europe – but Europe was buying it from Russia, so the physical gas never actually entered Ukraine from Europe). And in 2024, physical transit ceased when fighting started near Sudzha.
To add to what's been written, I'll elaborate on some things. All of our problems with the EU really started on a global scale when Putin began to rein in the so-called "seven bankers" who had been supplying almost free oil and gas while the Western beneficiaries profited from production-sharing agreements. And when Russia refused to ratify the Energy Charter.
The Energy Charter required the separation of production and delivery of oil/gas, required the supplier to deliver regardless of payment or contract terms, with prices set abroad. It also built in a mechanism for forced price reductions by requiring the owner of the gas transmission system to allow competitive access to other suppliers' oil and gas. On paper, this meant admitting Central Asian and Kazakh hydrocarbons; in reality, it meant control over the pipeline by BP, Exxon, Total, Chevron, etc. The Russians are still trying to squeeze Western oil and gas interests out, with limited success.
At that time, they tried to strangle Russia through Ukraine, whose gas transit system could potentially increase deliveries up to 400 billion cubic meters per year, provoking two gas wars and creating a narrative in the EU that Russia was an unreliable producer. This began the dismantling of the globalized system of long-term oil-indexed contracts and a shift to exchange-based (i.e., manipulable) pricing.
To that end, Yushchenko started ordering pipe dreams about TAP, TANAP, and Nabucco pipelines to supply non-Russian gas; renegotiating contracts with Russia; seizing Ukrainian refineries (like those owned by Tatneft); and constantly threatening to increase domestic production – Ukrainians could theoretically ramp up their own gas output to 60 billion cubic meters per year.
Around the same time, South Stream (an analogue of TurkStream and Nord Stream) was buried. Russia tried to use a legal loophole to build Nord Stream, since surveys had been done back in the late Soviet period. They also completed Blue Stream (at a time when Erdogan was in power in Turkey and Turkey was almost openly sponsoring Wahhabis – so that wasn't ideal). Gazprom bought up a ton of onshore infrastructure in Europe, created joint ventures, etc. And when the completion of these pipelines became inevitable, the EU adopted the discriminatory Third Energy Package and Regulation No. 715/2009 on conditions for access to natural gas transmission networks, to legally implement roughly the same scheme that the Energy Charter envisioned.
Gazprom tried to bypass further risks by building the OPAL onshore distribution pipeline, but it was capped at 50% capacity. Then came the need to break up Naftogaz's vertically integrated structure: separating production, transportation, and underground storage in western Ukraine – done under the pretext of supposed massive shale gas deposits in Donbas, so that Ukrainians would be emboldened to cut ties with Russia.
And then the snowball rolled: retroactive contract renegotiations, biased Stockholm arbitration rulings, illegal restrictions on the Druzhba pipeline, GTS and OPAL restrictions, delays in Nord Stream 2 construction, and obstacles to TurkStream. Gazprom tried to sue, and through Erdogan's vanity, attempted to make Turkey a gas hub so that Russian gas would magically become Turkish and avoid the Third Energy Package restrictions. But European companies flatly refused and announced a program to abandon long-term contracts, retroactively renegotiated terms, applied the Gas Directive retroactively to already-built Nord Stream 1 and 2, etc. Meanwhile, they drained every possible spare dollar from Ukrainians – about $70–90 billion – through ever-rising tariffs, and legislatively enshrined a rejection of Russian gas, an energy transition to hydrogen, and exchange-based pricing.
The exchange-based pricing system worked for exactly one quarter: oil at $38 at the bottom, gas at $82. Europe was overjoyed. Then came the month of panic from the Southern Butovo gas field, when oil futures briefly stabilized prices in Europe, but Europe was terrified by the prospect of gas prices again reaching $2,000–3,000 per thousand cubic meters. Then COVID, sanctions, the sabotage of Nord Stream, and the eventual halt of transit in meaningful volumes.
Europe is fighting us mainly to turn the clock back to the 1990s: free oil and gas deliveries, total control, all foreign currency revenues ending up in EU sovereign debt, nouveau riche in tasteless outfits buying useless villas for millions, parading their mistresses around Milan in Bentleys and Hermès bags, while the oligarchs' children spend millions on London apartments where Harry Potter was filmed.
In fact, the first to declare that war with Ukraine and the EU was inevitable were energy experts – our Martsinkevich and Ukrainian Zemlyansky – in late November 2019. For an hour and a half, they speculated on how to continue living and exporting to the EU, and concluded that the system was broken – and historically, that meant either upheaval or war. Martsinkevich was completely drunk and smoked through the entire hour and a half. Interestingly, in the US over the last year and a half, a view has been gaining traction that the "GDP" indicator should be replaced by an energy consumption index. JUST THINK ABOUT IT!