Think tank: EU, Ukraine speak different languages on energy

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Representatives of a Ukrainian think tank deplored the lack of understanding between Kyiv and Brussels on energy issues and called for a permanent expert panel to be created to improve communication.

Speaking on 17 April at a conference organised by Carnegie Europe, Olena Pavlenko, president of DiXi Group, a think tank specialised in Ukraine’s energy issues, warned that disenchantment was growing in Ukraine over its membership in the EU-sponsored Energy Community.

Pavlenko said that initially Ukraine saw its membership as a safeguard against Russia. However, she said Kyiv realises that the EU has little power to stop Russia from building pipelines that bypass Ukraine, such as the Gazprom-favoured South Stream project, planned to bring gas to EU territory under the Black Sea.

Ukraine was disappointed at the EU when it “stayed aside” in the 2009 Ukraine-Russia gas crisis, she said.

During the January 2009 gas crisis, which left several EU countries in the cold, the EU played a neutral role as a mediator.

Deceived expectations

Pavlenko quoted Janez Kopa?, the head of the Energy Community secretariat, who said that Ukraine joined the organisation because “it wanted to make its legislation closer to the EU’s, which is reliable to investors”.

But Ukraine saw it differently, she went on, quoting Yuriy Boyko, former energy minister of Ukraine – now the country’s vice prime minister – who said that when Kyiv joined the Energy Community, it raised two issues: receiving EU funding for its gas pipeline modernisation and “support against South Stream”.

Pavlenko said there were mixed feelings in Kyiv about the concrete results under the Energy Community framework. In the market for electricity, for example, Ukraine was able to export electricity to Hungary for €172 million in 2012. But the country had also received warning letters from the Energy Community secretariat about breaches to tender rules.

More importantly, she said, Ukrainian authorities were complaining about the delay in EU investments in the country’s gas pipelines, expected since 2008, and now they had decided to start paying for it themselves.

Roman Nitsovych, programme manager of the DiXi Group, said that the issues were even more complex in the context of the Ukraine-Russia relations. Ukraine wants to negotiate a lower price for the gas it imports from Russia and normally these talks should be kept on a separate track, he said. However, Russian politicians say that to solve the problem, Ukraine should withdraw from the Energy Community, he added.

Managing pipelines

The creation of a gas consortium to manage the Ukrainian gas network is also linked to the negotiations on gas price, he further argued.

Nitsovych said the Ukrainian government wanted to achieve a significant gas price cut, not 10%, but by half.  

“Therefore we cannot exclude any development,” he warned.

“Russia wants a bilateral consortium, which would not only operate, but own the gas transportation system [GTS]. Ukraine’s position is there should be a trilateral consortium to operate GTS. The position of the EU is that Ukraine has not addressed this issue sufficiently with its services, that the Union cannot participate in a commercial project, and that European companies should be involved instead,” Nitsovych said.

Jeffrey Piper from DG Energy of the European Commission said that the EU executive was not going to fund the €308 million for the modernisation of GTS. It is the role of the international financial institutions to do so, he said. 

A high-level round table will be held on GTS in May, Ukraine’s energy ministry has announced. But Nitsovych said he did not expect decisions taken anytime soon.

He recommended a permanent EU-Ukraine expert panel be set up to improve communication between Ukraine and the EU.

The European Energy Community was established firstly between the EU and countries from Southeast Europe. According to the Energy Community Treaty signed in 2005, the members commit to implement the relevant EU legislation and liberalise their energy markets.

Ministers agreed in 2010 to expand membership to Moldova and Ukraine, extending its reach beyond the Western Balkans.

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