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While the world is focused on OPEC news and Easter preparations, the Ukrainian crisis is heating up and there is a real threat of a military confrontation involving Ukraine, Russia, and Belarus. Currently, the Ukrainian military is fighting Moscow-backed separatists in the Donbas region. At the same time, heavy clashes with Russian-backed forces in and around Shymy have been reported. International pressure has been building on Russia to force a direct ceasefire, but no moves have been made. In recent weeks, analysts warned of a possible full-scale military confrontation as they considered the military moves in the region as provocations by Moscow. At the same time, most confrontations were localized, with no real regional impact yet.

The military stalemate, however, could well be coming to an end. A growing amount of reports have emerged showing not only largescale Russian military movements towards the Ukrainian border but also Moscows only regional supporter Belarus has deployed new troops to the Ukrainian border. As Julian Ropcke, a German Bild reporter, said on Wednesday, large amounts of Belarus military hardware, including BTR-80 armored vehicles and military trucks are moved to the border region. Kiev has already reacted to the growing threat perception by calling up reinforcements. Ruslan Khomchak, Ukraines Commander-in-Chief, stated to the press that Russia is building up armed forces near Ukraines borders in a threat to the countrys security.

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Russian TV channel Russia Today indicated that Moscow is going to support troops of the self-proclaimed Donetsk Peoples Republic (DPR) to come home. The coming days could be a major watershed for the regions military-geopolitical situation. The West has always assumed that Moscow was more than happy with the current situation, controlling not only the Donbas area but also preventing Ukraine from joining NATO. To expect Putin to be content with this stalemate, however, without having any option for a diplomatic resolution, seems overly optimistic from those powers. Russias ultimate dream is to unify Russia and Ukraine., a dream it is willing to achieve either with hard diplomacy or military means. Moscow appears to have become increasingly unhappy about its lack of progress in achieving that dream, partly due to it being handicapped by the Minsk Accords. The Biden Administration, which is less flexible to Moscows strategies than the previous administration, is also a possible reason for Russias new military adventures. Bidens State Department speech on February 4th included a clear message to Russia that the days of rolling over in the face of Russias actions are over. It is certainly possible that the speech pushed Russia to ramp up its military actions. Meanwhile, in Belarus and Ukraine, the West is perceived to be waging a hybrid war against Moscow. From Putins point of view, the only option now is to actively counter-attack. Military analysts are still arguing about what Moscows options are in the coming days. A majority expect a so-called localized escalation, dramatic and devastating, leading to the deployment of Russian peacekeepers. Such a move could be used to justify future military moves by Russia. US Secretary of State Antony Blinken filed a complaint on Wednesday in which he reiterated Washingtons support for Ukraines territorial integrity in the face of Russias ongoing aggression. If Putin believes the West is weak, however, a military move, which would give Russia access to Crimean water supplies, would be a very attractive one. Ukrainian observers believe the Kremlin may even consider a decisive military push through south-eastern Ukraine to create a land corridor linking Crimea with Donbas and end the peninsulas chronic water shortage Ukraine has blocked 85 percent of water supplies to the Crimea since 2014.

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A possible full-scale military operation will not only impact regional security but also put the European oil and gas sector under pressure, while maritime logistics could also be hampered. With Europes gas storage currently very low and dependency on Russian supplies still very high, a crisis here could have a major impact. Gas prices will soon be under pressure if the situation escalates. With storage sites at 37% capacity compared to 60% capacity at the same time last year or 74% at the start of this year, inventories are becoming critical. Analysts currently expect levels to fall as low as 16% of total capacity. To count on LNG supplies would be foolish if Asian demand continues to grow. The stranglehold that Russia has over European gas markets may soon become a major geopolitical market factor once again. If a Ukraine crisis erupts, potentially blocking or closing gas and oil pipelines in the region, a new energy crisis would follow closely behind.

It appears that Putins strategists have outmaneuvered Western powers. The weak response from both Brussels and Washington to Russian power moves in recent years appears to have emboldened Putin. Sanctions have been largely ineffective, while military options seem to be out of the question. Russian gas politics could now be a major pivotal factor in stopping any EU-NATO support if a renewed Ukraine conflict were to break out.

By Cyril Widdershoven for Oilprice.com

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