September 27, 2014

Around and About the Energy Community

O.Mahno, Director of editorial policy and communications of the Independent Center for Geopolitical Studies "Borysfen Intel"

(Notes on Committee hearings in the Verkhovna Rada of Ukraine about “The carrying out of Ukraine's commitments under the Protocol of Accession of Ukraine to the Energy Community, ratified by the Law of  December 15, 2010 № 2787 –VІ”)

The Chairman of the Committee N. MartynenkoThis Committee hearing in the Verkhovna Rada (Ukrainian Parliament) could be called another/ordinary one, if not the alarming situation with energy supply in Ukraine. Actually, the Verkhovna Rada's Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety did not just offer the invited to get acquainted with events around the fulfillment of Ukraine's obligations relating to the Protocol of Accession to the Energy Community, ratified by the Law of Ukraine December 15, 2010, but to express their attitude to this process of accession. Of course, taking into consideration the latest political (and military) events in the Ukrainian lands. As a result, the Chairman of the Committee N. Martynenko even considered it necessary to correctly point out in his opening speech that Russia is trying to use the “energy weapon” for putting pressure on Ukraine, which dared to move closer to Europe with the aim to defend its economic independence. That is, the MP noted, the process of accession to the Energy Community is not easy for Ukraine.

The Committee hearing in the Verkhovna Rada (Ukrainian Parliament)But this cannot justify... inaction of our experts and politicians who are responsible for its effectiveness. This leitmotif was voiced almost by all speakers present at the hearing.

It is appropriate to remind in a few words about the international conference “European Choice: new opportunities and challenges for the Ukrainian nuclear power energetics”, which was held just over a year ago, where also all the present specialists' attention was focused on the topic of energy security of Ukraine. I remember one of the invited Polish specialists, K. Rogulsky suddenly addressed the audience in the conference-hall with the question: Do they realize how increased tariffs for the Polish population after the privatization of Polish institutions (like our regional power companies) responsible for the electricity supply to the domestic market? And he answered his own question, which embarrassed the audience — the tariffs… have decreased. And the reason for the decrease was a real competition, which embraced the Polish market of energy supplying. Therefore, Polish citizens (and not they alone) are satisfied with this state of affairs, and almost do not worry about the prospects of their energy market, knowing that the Polish government will not allow itself any actions which would worsen their everyday life. That is why they do not have any negative perceptions of the European Energy Community. And thus, Polish experts cannot understand what prevents Ukraine (almost similar to Poland, not only in terms of population) from doing the same? There is no understanding of its benefits? Lacking power specialists or lawyers, carefully defining all the “pros and cons” of this issue for Ukraine? Or do they simply not need this because in our tank farms there is a sufficient amount of natural gas? Instead of answering let me cite only one fact: the GDP of the Polish state is at least three times larger than our own, but Poland consumes almost three times less gas than we do.

The Committee hearing in the Verkhovna Rada (Ukrainian Parliament)However, here it would be useful to remind how long it took Poland to become a member of the above-mentioned Community. Our Ukrainian experts are well aware of this. I suspect, they also know very well the answers to the above questions about the future of fulfilling by Ukraine of its obligations with respect to the protocol of the Energy Community.

Janez Kopač, Director of the Energy Community SecretariatThe present at the event Janez Kopač, Director of the Energy Community Secretariat, also knows the answers to these questions, but it is not in his competence to speak about them — we should discuss and resolve our problems ourselves, especially if we are interested in solving them. Mr. Kopač for half an hour had been telling the audience about the reforms necessary under the Agreement on the foundation of the Energy Community. They are caused by the state of affairs in Eastern Europe, where the events in Ukraine are almost in the first place. And the above-mentioned Community can't help responding to them. Individual activities relate to the twenties-thirties of the 21st century, and Ukraine, in the case of its full connection to the Community, will have to adjust its economy, as they say, on the move.

The invited to the meeting of the Committee representatives of the executive bodies actually reported on their implementation in the context of Ukraine's commitments, although they let the audience understand that at the present time, they and their colleagues in the ministries  would have to work in emergency mode, including on the topic of accession to the Energy Community. For example, are being revised laws on the gas market, are being analyzed the problems of implementing an effective statistics in the energy sector, are being studied the enhancement of the role of the gas issue in the energy security of Ukraine, and so on.

The representative of the National Institute for Strategic Studies A. SukhodolyaBut let us pay attention to the fact that under the circumstances that emerged lately, the  society demands to deliver specifics. Specifics not just in words, but also in deeds. This was eloquently confirmed at the hearing by Professor G.Ryabtsev's speech dedicated to present of Ukraine. “As the inspired by secret services “Russian Spring” has not brought the expected success, — the Professor said at the beginning of his speech, — the main instrument of the “golden autumn”, most likely will be energy blockade, against which our country has almost nothing to put forward”.  And then he cited the facts that are directly related both to the subject of the Committee's hearings, and to the future of our country in general. For example, Moscow may block two-thirds of the supply of petrol and diesel fuel needed by the Ukrainian economy. This will lead to a deficit of petrol and diesel fuel of 2.5 and 3.5 million tons per year, which can be compensated by the available reserves of the state, operators and consumers only by a quarter, while the current reserves of fuel in the domestic market are enough for not more than 15 days.

Director General of OOO “Neftegazstroyinformatika” L. Unigovskyi

Consequences on this issue alone will significantly affect the economy of our state. And along with other problems will just blow it. That is why it is urgent to increase imports from Western Europe, to build up the volume of processing by running for this purpose capacities of  Lisichansk refinery and to increase supplies of domestic raw materials to Kremenchug refinery, to  sign contracts for the supply of Azerbaijani and Iranian oil through the OLT “South” and so on. If these and other urgent measures are neglected, says Professor, the state will soon partially or even completely lose its national sovereignty. With these conclusions agree the representative of the National Institute for Strategic Studies A. Sukhodolya, Director of the Department of Trade Statistics of Derzhstat A.Fryzorenko, Director General of OOO “Neftegazstroyinformatika” L. Unigovskyi.

 

Director of energy programs of the Independent Analytical Center for Geopolitical Studies “Borysfen Intel”, B. SokolovskyThe invited to the Committee's hearings Director of energy programs of the Independent Analytical Center for Geopolitical Studies “Borysfen Intel”, B. Sokolovsky found it necessary to draw the attention of experts to the problems of the Ukrainian nuclear energy:

“All our specialists are well aware that we have three major energy directions, already now requiring urgent serious decisions. What directions are they?

— We have a very large (about 60 %) dependence on the Russian gas monopoly;

— A large (over 70 %) dependence on oil imports, which are produced mainly from Russian oil;

— Colossal (almost 100 %) dependence on the Russian monopoly, supplying our Ukrainian nuclear power plants with nuclear fuel.

The simplest and fastest to solve is the problem on the first direction: to urgently arrange reverse gas supplies along with reducing the volume of consumption.

A little more complicated is the direction of oil products: at the time (at the initiative of the third President of Ukraine) was worked out a draft for a trilateral petrochemical complex, with the help of which within 3.5-4 years the question of the domestic supply of high-quality oil products could have been solved. It would be great to return to it now and to implement the previously developed!

But the third direction (nuclear energy, where Ukraine is almost entirely dependent on the neighboring Russian Federation, including nuclear fuel), — will need to tinker. And very much! One of the most suitable solutions to this problem is to realize the concept of energy independence with the help of NPP projects of Canada and France, having no connections to the Russian Federation. To see firsthand, it suffices to study Romania's experience of the use of Canadian reactors. This country is close to us, no need to travel far. But implementation of this option would take at least 5 to 7 years!

Frankly speaking, it seems odd that all the time we hear about gas... while other, more critical our energy dependences are slurred over!”

However, it is necessary not just to ascertain the possible threats to Ukraine, but to honestly name at least some of their causes. What do I mean? For example, participants of the hearings suggested that the Cabinet should “update the state of implementation of Ukraine's commitments relating to the Agreement on foundation of the Energy Community... and make the control over their fulfillment more strict,” “improve the coordination of central executive bodies responsible for the development of legal acts”. They also recommend the Cabinet to accelerate the implementation of measures for the integration of the United electric power System of Ukraine into the Union of the Central European power grid”, to amend the law “On the principles of functioning of the electricity market of Ukraine”, taking into consideration the proposals of the Energy Community, and so on.

In other words, if you carefully delve into conclusions of these Committee's hearings alone, and study the necessary documents relating to the activities of state specialists in the question of our state's accession to the said “Energy Club”, you may conclude that Ukraine is not only far from the finish line — it has not moved far from the start in the matter of joining the respected Energy Community.

And so it will be until we stop, as Russians say, “beating around the bush”, and point to real causes of our “energy marking time” — private interests of Ukrainian capitalists, who can only take care of the monopoly. That is, the Ukrainian society needs to make the Ukrainian capital be socially responsible. Otherwise we will have to admit that under the rubble of the national economy may be buried the statehood of Ukraine. If someone does not agree with this conclusion — I propose to look at the dynamics of increasing of our electricity tariffs and prices of petroleum products.