KYIV, Ukraine—This is Ukraine’s sixth consecutive New Year at war. In the frigid steppes of the country’s southeastern Donbas region, tens of thousands of Ukrainian troops remain engaged in a defensive, limited conflict against a Russian invasion force. Europe’s only ongoing land war has so far killed more than 13,000 people and casualties still occur daily.

However, even as fighting continues in the Donbas, Kyiv and Moscow recently found common ground on another, distant battlefield. On Dec. 30, the two former Soviet allies agreed to a new five-year deal for Russian gas to continue transiting through Ukrainian pipelines to the European Union.

The negotiations were a contentious nail-biter, coming down to the final two days before the previous 10-year contract expired on Jan. 1. Both Ukrainian and Russian leaders lauded the new deal as a win for their respective countries.

“Europe knows, we won’t fail it in terms of energy security,” Ukrainian President Volodymyr Zelenskyy wrote on Facebook.

“The signing of these documents indicates that it is possible to discuss and reach an understanding even on the most difficult issues … Russian gas transit via Ukraine will continue on terms acceptable for all sides,” Russia’s Prime Minister Dmitry Medvedev wrote on the Russian social media site VKontakte.

Since the breakup of the Soviet Union in 1991, Russia has often leveraged its power over Ukraine through the energy economy. Particularly, by cutting off gas supplies in winter. (Photo: Nolan Peterson/The Daily Signal)

Underscoring what some experts saw as further evidence of a tepid thaw between the two warring countries, Ukrainian and Russian forces conducted a large-scale prisoner exchange on Dec. 29. In all, Ukrainian forces handed over some 127 captured militants to the two Russian-backed separatist territories in the Donbas. In turn, 76 Ukrainians were repatriated to government-controlled territory. 

To be sure, Dec. 29’s prisoner exchange was a breakthrough achievement for Ukraine after nearly six years of war. So, too, was Dec. 30’s gas transit contract agreement with Russia. Yet, many Ukrainian experts and officials remain skeptical that a broad détente with Moscow is truly in the works. The general consensus among Ukrainians is that the chances for peace remain bleak in 2020.

“It depends on what you call peace. A general cease-fire in the east—then yes. But peace as part of a peace treaty—unlikely,” Ivan Lishchyna, deputy minister of justice of Ukraine, told The Daily Signal.

“In short—no, peace is not possible in 2020,” Lishchyna said.

Michael Bociurkiw, a former spokesman for the Organization for Security and Cooperation in Europe, was similarly skeptical about the war ending in 2020, yet he saw recent events such as the prisoner swap and the gas deal as “major confidence-building measures which nudge the two sides toward the ultimate goal of peace.”

“Although my expectations for a long-lasting and durable cease-fire are extremely low, such agreements need to be viewed as a step forward,” Bociurkiw told The Daily Signal.

 Gas Wars

Russia is the top supplier of the European Union’s natural gas imports, comprising roughly 40% of the market. Of that amount, about 45% of Russia’s gas exports to the EU go through a network of Ukrainian transit pipelines built by the Soviet Union in the 1970s and 1980s.

In what was roughly a $3 billion a year business in Ukraine, revenue from transit Russian gas comprised about 3% of the country’s gross domestic product under the recently-expired 10-year contract. 

Russia’s economy is also heavily dependent on gas exports. Gazprom’s sales reportedly comprise 5% of Russia’s $1.6 trillion annual gross domestic product. Of that number, European customers account for about 70% of Gazprom’s gas revenue, according to company data.

Since the breakup of the Soviet Union in 1991, Russia has often leveraged its power over Ukraine through the energy economy. Particularly, by cutting off gas supplies in winter.

A recent pro-reform protest in central Kyiv. (Photo: Nolan Peterson/The Daily Signal)

Thus, Dec. 30’s contract renewal agreement eases concerns that Moscow might turn off the spigots this year. And—for the time being at least—it appears that Kyiv has secured the promise of sustained revenue from Russian gas transit fees for five more years. To boot, on Dec. 27, Russia’s national gas conglomerate Gazprom also paid an outstanding $2.9 billion arbitration penalty to Ukraine’s state-owned gas company, Naftogaz. 

“The Russians had no choice but to accept our proposal on gas transit,” said Alexander Khara, deputy chair of the Black Sea Institute of Strategic Studies, a think tank. “To secure cash inflow and to avoid gas supply disruptions to their European consumers, the Russians agreed on a compromise.”

Still, the new contract marks a sharp reduction in transit gas revenue for Ukraine.

In 2019, Russia sent about 90 billion cubic meters of gas through Ukrainian pipelines to the EU. However, Dec. 30’s new contract guarantees less than half that amount—40 billion cubic meters of Russian gas per year—through Ukrainian pipelines until the end of 2024. That flow will generate about $7.2 billion in revenue for Ukraine over five years, representing about half the income rate of the previous contract, analysts say.

The Nord Stream 2 Effect

For Ukraine, the new five-year gas deal with Russia is somewhat of a stopgap measure, softening the inevitably negative economic impact of Russia’s controversial Nord Stream 2 pipeline, which is scheduled for completion in 2020. Once online, the new pipeline will effectively double Russia’s capacity to directly deliver gas to Europe.

“As to the signed agreement on gas transit, it’s more the result of Russia’s current inability to make it alone without the Ukrainian gas transit system than a sign of a possible, broad détente,” said Mykola Bielieskov, deputy director of the Institute of World Policy, a Ukrainian think tank.

“The most important issue is still unresolved: What will Ukraine do when Nord Stream 2 is completed and starts pumping gas and Russia no longer needs Ukraine’s gas transit system?” Bielieskov said. “This issue is just postponed until 2025.”

Nord Stream 2 parallels the existing Nord Stream pipeline’s path from Russia under the Baltic Sea, making landfall near Greifswald, Germany. Nord Stream—which went operational in 2011— is the longest undersea pipeline in the world, capable of delivering 55 billion cubic meters of Russian gas annually to Germany. That gas can then be forwarded on to other European clients. 

U.S. officials have opposed Nord Stream 2 because it increases Europe’s dependence on Russian gas and bypasses Ukrainian transit pipelines.  

“The problem with Nord Stream 2 is that it is not an economic project. It was developed for only one reason: to create an alternative route for transporting Russian gas on the way to Europe that does not pass through Ukraine,” U.S. Ambassador to Germany Richard Grenell said last year.

A vessel lays concrete-coated pipe for the Nord Stream 2 gas pipeline onto the seabed of the Baltic Sea Aug. 16, 2018, near Lubmin, Germany. (Photo: Sean Gallup/Getty Images)

Originally, Nord Stream 2 was slated for completion by the end of 2019. Yet, U.S. sanctions late last year targeted Gazprom’s construction contractors. Work on Nord Stream 2 stopped on Dec. 20 when Allseas, a Swiss-based offshore pipeline and platform company, withdrew from the Russian project.

Without Nord Stream 2 up and running, Russia still needed Ukrainian transit pipelines to get its gas to Europe this winter. Thus, U.S. sanctions effectively delayed Nord Stream 2’s completion just long enough to force Russia’s hand in signing a new gas transit contract with Ukraine before the end of 2019, when the previous contract expired.

“The driver of the gas deal was the U.S.’ sanctioning of Nord Stream 2, which delayed Russia’s timeline for the completion of the pipeline and thus forced Gazprom to continue to export gas through Ukraine,” Michael Carpenter, a former senior Pentagon official who specialized on Russia and Ukraine during the Obama administration, told The Daily Signal.

“I don’t think the gas deal will pave the way toward a resolution of the conflict, though it’s certainly a positive development,” Carpenter said.

For its part, Gazprom says the Nord Stream 2 project is still on track for completion in 2020. Moreover, Nord Stream 2 is not the only economic headache for Kyiv tied to Russian gas. TurkStream, another Gazprom pipeline under construction, also bypasses Ukraine, connecting Russia with Turkey under the Black Sea. 

TurkStream comprises two pipeline strings, each of which has the capacity to deliver 15.75 billion cubic meters annually. According to information on Gazprom’s website, the first string is meant to deliver gas to Turkey, while the second string will directly deliver Russian gas to southeastern Europe.

Russian President Vladimir Putin and Turkish President Recep Erdogan are scheduled to celebrate the opening of TurkStream on Jan. 8.

TurkStream has reportedly already begun delivering Russian gas to Bulgaria, a country that has traditionally gotten its Russian gas via a pipeline that goes through Ukraine and Romania.

More Than Meets the Eye?

In September, Kyiv and Moscow exchanged 70 prisoners—35 from each camp. Two planes decked out in their respective Ukrainian and Russian paint jobs shuttled between Kyiv and Moscow to complete the deal. In contrast, Sunday’s prisoner exchange took place at a military checkpoint near the front-line town of Horlivka. Although it was a lower key affair with less press coverage, Zelenskyy heralded the swap as “a great victory.”

“The most important thing is that people are home,” Zelenskyy said Sunday, welcoming home the freed Ukrainians.

Zelenskyy swept into office in 2019 on a perceived mandate to end the war. To that end, the Ukrainian leader—a former comedian with no previous government experience—has made several bold peace overtures to Moscow to jump-start peace talks. 

Among those gambits, Zelenskyy has authorized the unilateral withdrawal of Ukrainian forces from some front-line positions. He also agreed in principle to hold elections in the Donbas—a longstanding Russian requirement to sit down for peace talks.

Zelenskyy’s efforts to break the war’s stalemate have spurred weeks of peaceful protests across Ukraine and a nationwide “anti-capitulation” movement. Polling shows that many Ukrainians are reluctant to trust Russia. War veterans, in particular, have been outspoken in their opposition to Zelenskyy’s peace plans, demanding that he not hold elections in the Donbas until all Russian troops have left the contested territory. 

“I do not think that Zelenskyy’s current peace talks with Russia have any chance of success,” said Volodymyr Mozghovyi, head of the Ukrainian Youth Organization.

“Ukrainians need to defend their country,” Mozghovyi told The Daily Signal. “Otherwise, Putin will celebrate victory in Kyiv—then in Warsaw.”

If elections are held before Ukraine has full control of the Donbas, Zelenskyy’s critics contend, then Russia can influence the vote in support of its preferred candidates, giving the Kremlin virtual voting rights in Ukraine’s national legislature.

However, despite the domestic blowback, Zelenskyy has pressed forward and scored some high-profile successes in pursuit of a peace deal. Notably, the Ukrainian president sat down with Putin for peace talks in Paris on Dec. 9. 

Brokered by French and German leaders, the Paris talks symbolized a recommitment by both Kyiv and Moscow to the Normandy Format, a peace negotiation framework dating back to June 2014 that also comprises France and Germany.

In the run-up to Paris, Ukraine’s outsized role in Washington’s current impeachment drama had some Ukrainian experts and officials worried that Zelenskyy may lose negotiating leverage against Putin if it looked like American support was in jeopardy. 

Yet, the general consensus among Ukrainians is that Zelenskyy held his own opposite Putin. While the Paris peace talks didn’t lead to a breakthrough, they also didn’t hurt Ukraine’s position, either, many Ukrainians believe.

From left to right: Ukrainian President Volodymyr Zelenskyy, French President Emmanuel Macron, Russian President Vladimir Putin, and German Chancellor Angela Merkel attend their summit on Ukraine at Elysee Palace Dec. 9, 2019, in Paris. (Photo: Christophe Petit Tesson-Pool/Getty Images)

In a joint communiqué following the Paris summit, the four Normandy Format participants committed to both a full cease-fire and a prisoner swap by year’s end. They also agreed on the need for elections in the Donbas—a point that remains a fractious issue among Ukrainians opposed to Zelenskyy’s peace efforts.

While Sunday’s prisoner exchange was certainly something to celebrate, the New Year’s cease-fire never materialized—Russian shelling wounded one Ukrainian soldier on Jan. 1. Consequently, a comprehensive peace deal with Russia isn’t likely to happen anytime soon, many officials and  experts say.

“Putin still needs it to put pressure on Ukraine so he can achieve his goal of controlling the country’s geopolitical orientation,” said Carpenter, the former senior Pentagon official. “I don’t see any conditions present that would cause the Kremlin to give up on this goal.”

Khara from Black Sea Institute of Strategic Studies shared a similar prognosis regarding the likelihood of peace in 2020.

“The Russians believe that they have the upper hand over the West in general, and Ukraine in particular,” Khara said.

War Season

In April 2014 Russia carried out a hybrid warfare invasion of the Donbas. Caught off guard initially, Ukrainians soon rallied to their country’s defense by launching a grassroots war effort. By that July, a ragtag coalition of Ukrainian government troops and civilian militias had gained the upper hand against Russia’s forces. Then, with its hybrid warfare plan in shambles, Russia outright invaded eastern Ukraine with thousands of its own regular troops. 

Today the conflict is a limited, conventional war, mostly fought from trenches. A cease-fire known as Minsk II went into effect in February 2015, locking the war along its current front lines. 

Over the years, the war has waxed and waned in intensity amid a succession of failed truces. Russia has dialed up and down the violence in the Donbas as a way to coercively leverage its hard power advantage over Ukraine. Consequently, Ukrainian experts and officials are generally skeptical that Putin would voluntarily give up his single most powerful bargaining chip against Kyiv without a clearly beneficial trade-off.

“Peace depends on many factors, but the main one is Russia’s desire to reach a peaceful solution,” said Iryna Vereshchuk, a Ukrainian member of parliament.

The war has also irrevocably tarnished the image of Russia in Ukrainians’ eyes for generations to come. (Photo: Nolan Peterson/The Daily Signal)

The U.S. and the EU levied economic sanctions on Russia after its 2014 invasions of Crimea and the Donbas. Vereshchuk believes Russia would likely only accept a peace deal if it included relief from those Western sanctions, or if Ukraine renounced its claim to Crimea.

“Ukraine will not be able to do this in 2020 or other years,” Vereshchuk said about the possibility of abandoning Crimea. “[Western] sanctions are the only way to force Russia to rethink its policy toward Ukraine.”

Russia maintains de facto military and political control over the two so-called separatist territories in eastern Ukraine. Ukrainian officials say the combined Russian-separatist’s ranks of more than 30,000 militants comprise several thousand Russian regulars who mainly serve in command and control roles.

Despite reenergized peace talks, the pace of fighting in the Donbas has not yet significantly relented. Ukrainian combat casualties maintain a steady rate of about one death every three days, which has persisted for years. 

“Russia has no intention of backing down. Every day in the Donbas, Ukrainian soldiers receive presents from their enemies on the other side of the battlefield,” said Dmitry Dovzhenko, a Ukrainian veteran of the war in the Donbas.

Impossible Peace?

Despite the steady violence, the war in the Donbas is no longer an existential threat to the Ukrainian state or the country’s pro-Western trajectory. Rather, the war is a persistent governor on Ukraine’s democratic development, diverting political attention, money, and civil-society energy away from anti-corruption reforms and economic development.

Bielieskov, of the Institute of World Policy, predicts the war will likely remain at a “continued stalemate” throughout 2020 because neither Ukraine nor Russia is facing an economic crisis that would force its leaders into making unwanted concessions to end the war.

“Russian leadership sees the current status quo in the Donbas as bearable and continues to think it can just outwait Ukraine and have, in the end, somebody in Kyiv who can do Moscow’s bidding,” Bielieskov said. 

“On the other hand, Moscow is generally unable to compel Ukraine to implement the Minsk agreements as the Russian side sees fit,” he added, referring to the two cease-fire deals.

In 2017, Ukraine made Dec. 25 a public holiday. Previously, only Orthodox Christmas—celebrated on Jan. 7, according to the Julian calendar—was an official holiday in Ukraine. (Photo: Nolan Peterson/The Daily Signal)

The war galvanized Ukrainian civil society, spurring a patriotic, grassroots reform movement, which has sustained the 2014 revolution’s pro-democracy momentum. The war has also irrevocably tarnished the image of Russia in Ukrainians’ eyes for generations to come. Today, most Ukrainians are skeptical of reconciliation as long as Ukrainian territory remains under Russian control.

“I do not see [peace] as a possibility until the very unlikely scenario of Russia leaving the Donbas … and the even more unlikely scenario of it abandoning Crimea,” Lishchyna, the deputy minister of justice of Ukraine, said.