Experts of New Energy of Ukraine Alliance, Kyiv International Energy Club (Q-club) and Nomos Center publicized analytical materials called “One year of the Government. Monitoring transparency of the public authorities' actions in the energy sector and correspondence to Ukraine's energy security”
Experts of New Energy of Ukraine Alliance, Kyiv International Energy Club (Q-club) and Nomos Center publicized analytical materials called “One year of the Government. Monitoring transparency of the public authorities’ actions in the energy sector and correspondence to Ukraine’s energy security”. The study is prepared under the support of the Civil Society Impact Enhancement Program of the International Renaissance Foundation.
In 2010, production of natural gas by enterprises of NJSC Naftogaz of Ukraine totaled 18.320 billion cu. m., which is by 5.3 per cent less than in 2009. Ukraine’s natural gas production, including production by private companies, amounted to 20.05 billion cu. m., which is by 1.3 billion cu. m. less than in 2009. Thus, the decline in Ukraine’s natural gas production totaled 6.1 per cent in 2010.
During 2010, 98.6 billion cu. m. of natural gas were transported (by transit) through the territory of Ukraine and that is by 2.8 billion cu. m. or by 2.9 per cent more than during 2009.
The following should be considered as some of the main achievements of the government of Mykola Azarov in the natural gas sector:
– Passing the Law of Ukraine “On foundations of functioning of the natural gas market” through the Verkhovna Rada;
– Completion of the procedure for Ukraine to join the EU Energy Community Treaty;
– Initiation of the work on the issue of creation of LNG terminal in Ukraine with further transfer of this issue to the State Agency for Investments and Management of National Projects;
– Fulfillment of the IMF Memorandum in a part concerning an increase of natural gas prices for population;
– Signing Memoranda with the American side regarding works on exploring perspectives for shale gas production in Ukraine;
– An attempt to settle a conflict between Ukraine and Vanco Prykerchenska Ltd. in the Stockholm Arbitration Court.
However, it is difficult to call these achievements successful since they were attained not due to existence of corresponding strategic decisions, political will and resoluteness of the government, but rather on the contrary – they were attained in spite of the above mentioned factors since, as a rule, there was an external pressure on the government from, first and foremost, the IMF and the European Commission.
Failures of the government are caused primarily by the impact of internal factors. Oligarchs’ lobby is the most powerful among those. Basically, during the last year the government was carrying out a mission of serving the interests of clan-oligarchic groups. Concerning the natural gas sector, the services of the government were ordered mostly by the organized political group (OPG) of Firtash-Lyovochkin-Boyko. Serving this group’s interests, aimed at obtaining a discount for natural gas imported from the Russian Federation at whatever the cost, led to a number of the government’s actions that can be characterized as strategy failures:
– Kharkiv agreements “Naval Base for Gas” without changing the formula of the price for natural gas in the contract with Gazprom;
– Facilitation of fulfillment of the rulings of the Stockholm Arbitration Court concerning returning natural gas from the balance sheet of NJSC Naftogaz of Ukraine to RosUkrEnergo;
– Hampering fulfillment of the Brussels Declaration on modernization of Ukraine’s gas transit system;
– The government’s ignoring the implementation of the Extractive Industries Transparency Initiative (ЕІТІ) in Ukraine;
– Suspending gas supply (in September 2010 and January 2011) to Poland through Ustiluh Hrubieszow gas pipeline;
– Ignoring Ukraine’s main European strategic partner in terms of gas transit to the EU – Slovakia.
Besides that the government by any means evaded carrying out of reorganization of NJSC Naftogaz of Ukraine. Despite specious promises to change the formula of the price for natural gas in the contract with Gazprom, the negotiations were not successful and that was quite predictable.
Also, the government was not concerned with dealing with the issue of the Extractive Industries Transparency Initiative. Non-transparency increases the level of mistrust to Ukraine’s oil and gas sector. Its environment continues to be favorable for corruption schemes and fraud affairs involving laundering of the state budget funds, ineffective and inappropriate use of material-technical and energy resources.
Ignoring the country’s national interests, the government of Mykola Azarov was acting primarily for the benefit of the interests of regional corporate business groups. Obviously, this was caused not so much by the prime minister’s personal position, but rather by ‘the strategic assignment from above’ – from the President of Ukraine, who in his turn is guided by and serves the interests of the leading OPGs.
Contact information: New Energy of Ukraine Alliance, Daryna Zazhyrey, 050 313 42 08
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The goal of the Civil Society Impact Enhancement Program is to promote development of a system to protect the rights of public and municipal service consumers and to support NGO policy capacity building.
