This post provides a perspective on Ukraine’s energy status and economy in 8 charts.
Figure 1 The Ukrainian economy is dependent upon imports of oil and gas from Russia. Ukraine gained independence from The Soviet Union in 1990 and since then energy consumption, production and imports have all fallen steadily (Figures 2 and 3).
Figure 2 Ukraine is not energy rich which underpins poor economic performance and dependency on Russia. Sufficient coal is produced to satisfy domestic demand (Figure 1) and Ukraine has a significant nuclear power industry. There is a small amount of natural gas production with future hopes pinned on shale gas. With no oil production, all oil must be imported together with significant quantities of natural gas (Figure1).
Figure 3 Energy consumption in Ukraine declined sharply post independence as the country lost subsidised energy imports under the communist regime and faced market realities. By the mid-1990s consumption stabilised and although Ukraine must import significant amounts of energy, the country has managed to keep debts under control (Figure 7).
Figure 4 Post independence in 1990 the population of Ukraine has been in steady decline. In Russia, suicide became a major problem. I’m unsure of the cause in Ukraine, I imagine suicide, decline in birth rate and migration. While population growth is a problem in many countries, population decline has its own problems. GDP is linked to population and a declining, ageing population is difficult to support by a dwindling number of younger workers.
Figure 5 Ukraine’s per capita energy consumption is stable at just below 3 tonnes oil equivalent per capita per annum. To put this in context, the UK consumes about 4, Denmark just over 3, the USA about 7.5 and China about 1.5. Ukraine’s energy consumption is aligned with developed economies.
Figure 6 While Ukraine’s energy consumption is aligned with developed economies what it manages to produce with that energy is not. In 2012, per capita GDP was $US3,872 while in Denmark, which consumes a similar amount of energy per capita, the figure was $US56,253. Note these figures are distorted by inflation and changes to the exchange rate.
Figure 7 The decline in GDP post independence was severe but began to recover in the early noughties. Ukraine was hit hard by the 2008 finance crash and GDP has yet to recover to pre-2008 levels. The crash caused borrowing to rise, like it did in many countries, but borrowing is under control at 40% of GDP. One can’t help but feel that the origins of unrest in Ukraine are rooted in lost prosperity and dashed expectations.
Figure 8 The 2008 crash caused a sharp fall in the Ukraine currency (Hryvnia) against the $ but less so against the Rouble. But in both currencies, imports became more expensive.
In the recent past three events are shaping Ukraine’s future.
- Independence in 1990 caused a decade of economic decline that began to recover in the early noughties
- The 2008 financial crash knocked Ukraine off course and it is struggling to recover
- A falling population creates structural economic problems
Ukraine is dependent on Russia for energy imports and cannot succeed in armed conflict. Sevastopol on the Crimean peninsula is the home of the Russian Black Sea fleet and the area is therefore of major strategic importance to Russia. I believe the Russians will simply annexe Crimea and protestations from Ukraine, the EU, the USA and the UN will be ignored.
Ukraine is also of major strategic importance to Europe since several gas pipelines cross the country transporting Russian gas to Europe. Europe is also heavily dependent upon oil and coal imports from Russia. And so, when Americans talk of sanctions on Russia they had better come up with a plan B for European energy supplies at the same time.
Energy statistics are drawn from the BP statistical review of world energy 2013. Economic data comes from the United Nations National Accounts Database. Population data comes from the United Nations Population Division.