Russian-Ukrainian distribution of maritime spaces: compromise or concession

The occasion that caused “progress” in settlement of the most problematic territorial and border issues between Ukraine and Russia of 90-s and 2000-s is not clear yet.

The occasion that caused “progress” in settlement of the most problematic territorial and border issues between Ukraine and Russia of 90-s and 2000-s is not clear yet. It should be mentioned that there are several disputable issues within acknowledged maritime spaces in Ukrainian-Russian relations.

The most painful is a dispute on delimitation of the Kerch Strait. Ukraine’s traditional position in this dispute was based on the principle of succession, reaffirmed during mutual negotiations in 2005. In other words, Ukrainian government deemed that the maritime border with Russia in the strait should be similar with the administrative frontier of the former USSR territorial subjects – the Russian Soviet Federative Socialist Republic and the Ukrainian Soviet Socialist Republic. In spite of Ukraine’s official position, Russia denied such model of delimitation as if it would lose the control over the Azov-Black Sea ship channel, the last Russia’s sea-way available for navigation. But what makes Russia to abandon its traditional position of “the USSR successor” in the issue of the Kerch Strait? There is no doubt that in this issue Russia is influenced by economic factor. Having extended a total sovereignty over the Kerch Strait, Ukraine could have levy pilot charges from Russian ships. Before the recent summit in Yalta, Ukraine has had a full control over the deepest Kerch-Enikal ship channel (8 m). In accordance with the Order № 721 issued in 2002, all foreign ships including Russian had to pay a pilot charges using the Kerch-Enikal ship channel. Such provisions were not adequate in Russia’s vision. The main objective of Moscow was to provide the freedom of navigation in the strait. Furthermore, Russian ship-owners were not satisfied with navigation conditions of the Azov-Black Sea ship channel (3 m). The annual quantity of Russian ships that use the Kerch-Enikal ship channel is about 9 thousands. In this case, Ukraine has earned about $ 150-180 millions as an annual profit. During the recent years, Russia has made several attempts in order to force Ukrainian government to make any concessions. Such attempts were proved by “cold” conflict over Tuzla Isle in 2003 and by refusal of Russian warship to pay pilot charges in September, 2011.

But the firm position of Ukraine on the Kerch Strait issue seems to have changed according to the recent summit results. In conformity with the mutual statement, Ukraine has voluntary refused from the monopolistic sovereignty over the main sea-way in the Kerch Strait – Kerch-Enikal ship channel. Such concession deprives Ukraine from the extension of sovereignty over the main part of the Kerch-Enikal ship channel. Ukraine also loses an opportunity to levy pilot charges from Russian ships. Although, nobody at summit rejected Ukraine’s sovereignty over Tuzla Isle which could have nearly become the cause of Russian-Ukrainian war in 2003. The arrangements on delimitation of the Kerch-Enikal ship channel diminished a core geopolitical role of Tuzla Isle as Ukrainian “pied-а-terre” in the Kerch Strait.

Not less controversial moment in Presidents’ negotiations is a prospect of delimitation of the Azov Sea and oil and gas offshore “Palassa” in the Black Sea. The root of the problem is absence of legal status of the Azov Sea in international law. In accordance with Article 1 of Cooperation agreement between Ukraine and Russia in the Azov and Black Sea signed in 2003, the Azov Sea is determined as internal waters of Ukraine and Russia. But this agreement doesn’t include any provisions on delimitation. Despite dead-locked position of the Azov Sea and the offshore of the Black Sea, these maritime spaces have vital energy significance. According to National Institute of Strategic Research of Ukraine, forecasted recourses of natural gas and oil in the Azov Sea and offshore “Palassa” amount 1,5 billion tons and 1,5 trillions m³ in general. In this case Ukraine also supports the principle of succession as a model of maritime border delimitation. If the maritime spaces are delimitated in accordance with Ukrainian conditions, Kyiv will obtain the largest part of the shelf sea. It will be a real opportunity for Ukraine to solve the problem of energy security and it will be possible to minimize the consumption of Russian gas from 80 % up to 30 %. According to National Institute of Strategic Research of Ukraine, Ukrainian companies are able to emphasize the procurement of natural gas up to 8 billion m³ in nearest four years.

Analyzing Russia’s position on delimitation of these maritime spaces, Moscow supports the principle of so-called modified median line. The main idea of this principle is to distribute gas and oil deposits instead of the shelf of the Azov and Black sea. In such case, Russia could claim the largest amounts of resources in spite of the sea shelf location. But Russia’s intention to distribute the Azov sea and oil and gas offshore “Palassa” in the Black Sea is guided not only by ambition to control energy resources. There are several factors that influence on Russian position.

Firstly, Russia is not interested to lose gas exporting market in Ukraine. If Ukraine procured the most part of its offshore energy resources, the dependence on import of Russian gas would be significantly diminished. The evidence of Ukraine’s activity in its sea shelf is the start of exploitation of jack up floating drilling rigs in 2012. According to Ukrainian “Chernomornaftogaz” gas and oil company forecasts, it is planned to procure about 53 million m³ of natural gas by the end of 2012.

Secondly, Moscow is not interested in economic expansion of foreign competitors in the region. It is well known that Ukraine has granted a tender to procure Kerch oil deposit to Swiss Vanco Internatoinal ltd. If the project realized, Ukraine could earn $ 260 for a ton of distributed oil. Meanwhile, China is ready to invest into the procurement of gas and oil in the Black and Azov sea shelf. In accordance with 2011 arrangements, Beijing is selling jack up floating drilling rigs to Ukraine.

Thirdly, the procurement of new oil and gas deposits in the Azov and Black Sea will provoke the fall in oil prices in the world. And it is not profitable for Russian source-exporting economy.

That’s why if Ukraine makes any concessions to Russia on Azov and Black sea shelf delimitation issue, Kyiv loses any opportunities to minimize dependence on Russian gas, taking into consideration unfavorable provisions of gas importing contract signed by previous government.

So it is reasonable to ask a question about the sense or profit of Ukraine’s concessions to Moscow at recent summit in Yalta. There was no sense to make concessions and limit own superiority in difficult relations with Russian government.

However Ukraine makes the same mistakes. It is possible to compare results of the present concessions with so-called Kharkiv agreements in 2010 that prolonged Russian Fleet staying in Ukraine (Sevastopol) until 2042. Ukraine seems to provide freedom of navigation in the Kerch Strait in return for reviewing of unprofitable gas contract. Although, taking into account results of Kharkiv agreements, concessions to Russia didn’t satisfy expectations of Ukraine. Russia cut down gas prices from $ 516 only up to $ 416 for 1 thousand m³. According to former Ukrainian Ambassador on energy security related issues V. Kniazhnytskyi, adequate price on Russian gas for Ukraine cannot exceed $ 80-90 for 1 thousand m³. Speaking about results of summit in Yalta, there were no proposals from Russian representatives concerning gas related issue. There is no doubt that all concessions to Russia doesn’t respond Ukraine’s expectations.

Furthermore, it is possible to foresee the similar plot of distribution of oil and gas shelf of Zmiinyi Isle between Ukraine and Romania in the case of the Azov and Black sea delimitation. Of course, it is difficult to speak about appeals to International Court, but the nature of both issues has much in common. According to off-the-record opinion, the position of Romania was supported by the EU, that’s why the largest part of oil sea shelf was granted to Romania, in conformity with the Courts decision. The EU is interested in access to new energy recourses, even within the context of its member states’ national interests. Ironically, but in the case of the Azov and Black sea, the issue of the price on Russian gas may be a cause for concessions of Ukraine. In general, such issue of gas price is used by Russia as an effective lever of pressure on Ukraine. Despite all prospects from the procurement of the Azov and Black sea oil and gas deposits, the main problem is not an absence of delimitation but a budget deficit for the development of national energy sector of Ukraine. And this financial problem can be used by Russia in order to strengthen energy dependence of Ukraine. It is likely that Russia agrees to review drastically the present gas arrangements, including the conclusion of a new contract if Ukraine gives its consent towards Russian conditions of Azov and Black Sea distribution. Moscow is intended to use unfavorable provisions of gas contract for limitation of Ukraine’s freedom of actions in bilateral relations.

Taking into account the possibility of such plot of developments, the only measure for Ukraine is to attract foreign investors to mutual procurement of oil and gas deposits, in order to diminish energy dependence on Russia. The idea of mutual procurement should be a kind of reason for Ukraine in advocacy of its own position in the sea shelf distribution under the principle of succession. Moreover, such principle was used by Russia during delimitation of maritime spaces with Estonia in 2005. Thus, it is a real precedent, a supplementary reason in favor of Ukraine.

Therefore, the policy of concessions is not an effective mean to reach a mutual understanding with Russia in energy related controversies. Taking into account the possibility of such concessions, it is reasonable to speak about emphasizing of Ukraine’s dependence on Russian gas. And it is a final purpose of Russia’s energy diplomacy.

Georgii (George) Kukhaleishvili

Specialist in Political Science

and International Relations