Monday

25th Jun 2018

EU to help Ukraine cut Russia gas dependence

  • EU energy commissioner Sefcovic in Kiev on Friday (Photo: ec.europa.eu)

The EU aims to help Ukraine become independent of Russian energy supplies in the next “three to four years”, Ukraine's prime minister and an EU commissioner have said.

Volodymyr Grossman, the prime minister, spoke of the plan in Kiev on Friday (2 September), while hosting the European Commission’s energy chief, Maros Sefcovic.

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  • Ukrainian gas supplier Naftogaz is notoriously corrupt and inefficient (Photo: naftogaz.com)

He said Ukraine aims to “consume less energy and produce more energy” so that it can go from being “an energy importer to an energy exporter”, ensuring “energy independence” in “three or four years’ time”.

Among the reforms, it aims to split up its notoriously corrupt national gas distributor, Naftogaz, impose market prices for gas consumers, create an independent energy regulator, and create a new “energy efficiency fund”.

Sefcovic said that Brussels and Kiev are “very close” to finalising a new memorandum on EU support for the initiatives.

He said that if Ukraine created the efficiency fund, it would allow the EU to pay out a further €600 million in macro-financial assistance.

He also pledged to get the European Investment Bank, the World Bank, and the International Monetary Fund to get behind the energy reforms.

“Would Ukraine manage to increase its energy efficiency levels to the EU average level, the savings achieved would be greater than the energy consumption of Spain over a whole year. Ukraine could thus even become an exporter of energy”, the EU commissioner said.

He added that part of the joint strategy would be to make sure Ukraine's poorest private households get relief from price hikes.

Ukraine currently imports just 18 percent of its natural gas directly from Russia, compared to 34 percent in 2014. The drop is due, in large part, to reverse-flow purchases from Hungary, Poland, and Slovakia.

But its real dependence on Russia is higher, given that 90 percent of Slovak gas and some 45 percent of Hungarian and Polish gas originates in Russia.

The dependence helps the Kremlin to exert political pressure on Kiev with cut-offs or threats of cut-offs in a situation set to get worse if Russia builds new pipelines under the Baltic Sea or Black Sea bypassing Ukraine, as well as its reverse-flow suppliers.

The Russian timeline for the projects to be up and running is 2020 - the same as Grossman's "three to four years".

With winter - the usual setting for Russian cut-offs - around the corner, Sefcovic added in Kiev that the EU commission is willing to mediate, as in the past, to keep the gas flowing to Ukraine and via Ukraine to Europe.

“The trilateral format [EU, Ukraine, and Russia] remains the most suitable for discussing gas supplies for the upcoming winter heating season. In this sense, I am also looking forward to meet with Russian authorities in the next weeks”, he said.

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Washington would still like to block a planned gas pipeline between Russia and Germany but is not yet considering hitting companies involved in the project.

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