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"Ukraine Can Achieve Energy Independence in 5-7 Years" - Energy Expert
2 December, 2019
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Research Director at DiXi Group thinktank Roman Nitsovych (L) and Director of the Energy Industry Research Center Oleksandr Kharchenko (R) speak to Hromadske's Nataliya Gumenyuk on December 1. hromadske

If Kyiv strikes a deal with Moscow and applies European energy legislation, it will be able to open its market to new energy players. This, along with improvement of efficiency and transfer to other energy sources, can lead to energy independence in the foreseeable future, experts argued on the latest episode of the Sunday Show.

Roman Nitsovych who is the Research Director at thinktank DiXi Group believes Ukraine has been forced “to use all possible channels of communication – even bilateral ones – to reach the deal”. This is evidenced by the change of format from trilateral in Brussels to bilateral talks that were held in Vienna on November 28.  

READ MORE: The Question of an Annual $3 Billion: Why Ukraine Needs a Contract With Russia on Gas Transit

Director of the Energy Industry Research Center Oleksandr Kharchenko argues that Ukraine’s position since the conclusion of the previous deal in 2009 has changed radically with the free trade agreement and Ukraine being part of the European energy community. Whilst Russia’s Gazprom wants to continue to practically “own the Ukrainian gas transmission system” and call the shots, Ukrainian Naftogaz suggests shifting to European rules. The deal Ukraine insists on would open the doors for Kyiv to work directly with Western partners rather than serving Russian interests only.

“It is a very Russian story to offer some kind of a package deal: either it is a political deal which could be reached around the next Normandy talk, or it is not only a transit deal but also a gas supply deal […] Previously those political deals associated with gas transit or supply of gas [came] at a very high cost for Ukraine,” Nitsovych says. 

The reason Russia is trying to solve the issue politically are the Stockholm Arbitration ruling that obliges Moscow to pay a $3 billion fine to Kyiv, as well as the $6 billion Ukrainian Anti-Monopoly Committee ordered Kremlin to pay, Kharchenko argues.  

Any discussion in Vienna, in Brussels started with the Russian side saying ‘before we solve this issue, we are not ready to talk about anything.

The problem lies in the fact that the Stockholm Arbitration court does not deal with political issues as a purely commercial court, the expert explains. Trying to change the ruling through political blackmailing or political discussion would set a dangerous precedent for Europe, Kharchenko warns.

READ MORE: “Gas War”: Will Ukraine and Russia Agree on Transit?

At the same time, there are a number of factors that could strengthen Ukraine’s negotiating position despite Russia insisting on Ukraine dropping all claims in Stockholm: both the past victory and two current claims. Whilst Nitsovych believes reversing the verdict is out of the question, Kyiv can afford to make concessions with regard to the newer claims where arbitration has not yet started. On top of that, the current Ukrainian requirement to have a ten-year deal can be curbed, albeit not to the one-year deal Russia proposes. But above all, the deal must be commercial and in line with European law, Dixi Group director stresses.

Despite the seemingly clear Berlin’s position in favor of the Nord Stream 2, some German energy experts warn about the future of European energy security in case the Ukrainian GTS ceases operations, as there would be no functional alternative to the Nord Stream pipeline, Kharchenko notes.

READ MORE: The Great Unbundling: Gas Transport System Separates from Naftogaz

Moreover, Nitsovych points to European legislation which forbids one company to use all of the pipeline capacity. He cites a precedent with the Opal pipeline in Germany where Gazprom was only able to use no more than 50% of its capacity. The expert hopes the German regulator applies this rule to the Nord Stream pipeline too. Otherwise, it could face legal issues from the European Commission and Ukraine.      

READ MORE: What New EU Gas Pipeline Rules Mean for Ukraine

But Kharchenko draws attention to the fact that Ukraine should look beyond Europe. 

The solution today is in the U.S. The Senate is still in progress with the sanction bill against Nord Stream, [namely] technology to install Nord Stream pipeline in deep sea. If Senate votes for this bill, if the sanctions come [into force], it [would] mean that Russia has no technological way to complete Nord Stream 2 in the next three years [at the very least].    

This would ensure Ukraine significantly improves its leverage in future negotiations. 

/Interview by Nataliya Gumenyuk

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