Read a paragraph on ‘Ukrainian energy’ and the word ‘crisis’ is rarely absent. But the notion of Ukraine as haplessly dependent on Russian gas is off the mark. Since the energy crises of 2006 and 2009, when Russia cut off supplies to Ukraine in a battle over pricing, Ukraine has managed to reduce its reliance on Russia to the point where, last February, the then foreign minister, Leonid Kozhara, told European Voice that “Gazprom’s dominance in Ukraine is broken”.
How had Ukraine limited its exposure to Russia? It had increased coal production, bought Russian gas more cheaply from Gazprom’s European customers rather than from Gazprom itself, and had arranged for gas to flow from Poland and Hungary as well.
There have been other good-news stories. Ukraine joined the EU-based European Energy Community in 2011, taking on board a roster of obligations. There are also emerging renewable-energy and shale-gas industries.
But what it has not been doing is bringing transparency to either the ownership or the operation of its energy sector, despite the odd glimmer. (For example, an electricity law that was passed last year at least “goes in the right direction”, an EU official said.)
Outsiders would like to invest and help. At a post-crisis energy conference organised by the European Commission in 2009, “investors lined up to come and tell the Ukrainians what they would be willing to do”, recalls an official. But the government has barely reformed the sector, so the EU has not felt able to provide a loan (though the Commission provides some budget support for energy efficiency and renewable energy). Only the big international energy ‘majors’ are active in the Ukrainian market.
The new government needs to get the politics right as well as governance. The International Monetary Fund’s insistence on price rises for households is a particular problem, so the World Bank, above all, is trying to show Ukraine how to shelter ‘vulnerable customers’. The new energy minister, Yuriy Prodan, may be receptive. But, then again, he may not be: he was also energy minister when the Commission held its 2009 conference.