Ukraine has been shaken not only by numerous post-election events but by serious cataclysms in the energy sphere recently. Russian Gazprom demanded the payment of the “Ukrainian debt” by the companies that supply gas to Ukraine and threatened to cut off the gas. People were killed in a gas explosion in Dniepropetrovsk.  All these facts show that there is a real threat to the energy security of the country. That’s why it was not surprising that the President’s meeting with journalists was devoted to exactly this topic. It is interesting to find out Viktor Yushchenko’s opinion about all Ukrainian energy security problems. Especially considering the fact that these problems appeared some time ago.

First of all, the journalists asked Viktor Andreiovych to define his understanding of the energy security in Ukraine. The President answered as follows:

– We consider that the energy supplies sphere should be under the control of the Ukrainian state power. Energy supplies to Ukrainian consumers and energy transit should not be influenced by international factors whether by politically-cyclical factors or by the energy market by itself. This is a question of national economic policy i.e. of political independence of Ukraine. 

Regarding the energy security matter, it would be very good if Ukraine had enough of its own energy resources to provide for energy-independence. That’s why I would say that Ukraine needs to optimize its domestic energy market. We should give new meaning to the energy potential of Ukraine starting with the coal industry, developing new oilfields in bathypelagic parts of the Black Sea and the Sea of Azov and finishing with the construction of new nuclear power blocks. These will strengthen the energy security of our country and national security on the whole.

Additionally, Ukraine should make a lot of intense efforts in the international arena to improve its positions: construction of the Odesa-Brody-Gdansk oil pipeline, joining the European energy system, settling of the Burshtynsky energy-island issue, providing energy supplies to the EU (Poland, Slovakia, Hungary, Rumania) based on bilateral agreement. All the above are interrelated questions since we are talking about energy market where one kind of energy transfers into other kinds very quickly.

– What about the transit policy of Ukraine?

– We will initiate an energy-summit in Kyiv in the first quarter of 2008 where we intend to introduce a new conception of a gas transit system. It would be very good if we could seek an agreement on unification of rates and technical safety matters. These are the most important topics today.

I can say that there are some definite improvements in our energy security policy today. But there are also a lot of aspects, especially concerning the domestic energy market, which need urgent improvement.

– Does Ukraine intend to establish direct contract gas supplies? What could be the mechanism of relations between the participants of these supplies?

– I would like to state several key points for Ukraine here. First, we should set a simple, clear and transparent mechanism of gas supplies and payments. This means that it is necessary to lead the gas supplies system out of the shadow economy.

Secondly, the relations between buyers and sellers of energy resources should be based on market principles. The price of gas should be predictable and not dependent on the policy of separate enterprises. We speak in favor of transparent way of setting up a price on gas. Undoubtedly, USD 135 for 1000 cubic meters of gas is not an optimal price and it should be changed. But it is necessary to make this process transparent for all participants of the gas market and gas consumers.

Today, large amounts of Russian gas are transiting through Ukraine to Europe, Ukraine is also providing underground storage. So, the transit rates should also be defined at optimal levels.

Thirdly, it is necessary to guarantee the technical safety of gas in transit. Our policy on gas transit safety should be irreproachable since any statement about poor conditions of the Ukrainian gas-transport system hurts our international image

         Fourthly, it is necessary to reorganize the domestic energy market in order to keep it from being monopolizing and experiencing incorrect conflict-resolution. There are a lot of unresolved questions here. For instance, the question about reassigning the contracts from the industry’s gas supplies to UkrGazEnergo. As the matter of fact, my decree from September 7 was devoted to the questions of national energy market rearrangement.

– When will the question of gas supplies to Ukraine in 2008 be resolved?

– I think that we will come to agreement with the Russian Federation about the price of gas and transit rates in the nearest future.

– What are the main problems of the national gas market and what are some ways of solving these problems?

– The lack of balance in the domestic gas market is quite noticeable. It is necessary to allot approximately 9 billion Hryvna from the state budget to solve the systemic problems of GOC Naftagaz Ukraine. This national company has long-standing problems: non-payments, tax pressure and so on. There are questions about the work of RosUkrEnergo and UkrGazEnegro. The latter didn’t distribute its dividends last year which influenced the financial position of GOC Naftagaz Ukraine as one of the co-founders of this company. GOC Naftagaz Ukraine has a lot of problems with paying off its debts, credits and other liabilities of the previous years.

– Is it true that GOC Naftagaz’s long-term liabilities have been bought up by foreign companies?

– No, it is not.

– What’s your opinion about selling of at least part of Naftagaz’s stock, i.e. about privatization of this company?

– It is necessary to establish order in this company and only then consider any changes in its form of property.

– Mr. President, you say that there are a lot of questions about work of RosUkrEnergo and UkrGazEnegro. Have these questions arisen just recently? Even Russian Gazprom says that 50% share in RosUkrEnergo is Ukrainian…

– As I said before, Ukraine doesn’t have any relation to the co-founders of RosUkrEnergo.

And I would like to refrain from comments on the statements of some Gazprom’s representatives.

– The tragedy in Dnieprogaz showed that there are a lot of problems with gas-redistributing networks (former Oblgaz’s) in Ukraine. Is the state going to influence this situation? In what way (considering that most of Oblgaz’s were privatized a long time ago)?

– According to preliminary investigations, it would have been possible to avoid such a tremendous catastrophe. Now, we are going to change our regulation policy towards gas-redistributing enterprises. Notwithstanding the fact that most of these enterprises are privatized the state has enough means to influence. We can resume technical supervision; establish strict control over the process of fulfilling the obligations by license holders and so on.

– Does Ukraine intend to resume negotiations with Turkmenistan? Are you going to visit Ashgabat?

– It is hard to say whether it will be possible to resume the Turkmen gas supplies to Ukraine next year because there are some political problems in the relations between Ukraine and Turkmenistan. We are hoping to solve these problems during the Turkmen President’s visit to Ukraine. Concerning our future cooperation, Ukraine has some proposals for Turkmenistan. For instance, the possibility of Turkmen gas transit not only to Ukraine but to Europe too. I think that this idea would be interesting for Turkmenistan.

– You mentioned the Odesa-Brody-Gdansk oil pipeline project. But it is one of the most long lasting constructions in Ukraine. Besides, aren’t you confused about statements of some experts saying that oil reserves, for example in Kazakhstan, are overestimated?

 – I am well aware of different experts’ forecasts on oil production in the Caspian Sea region. Today, the Odesa-Brody-Gdansk oil pipeline project has received full political support from the states-potential participants in this project and from the European Union. So, it is only the matter of preparing a feasibility study.

Additionally, we recently entered into an agreement concerning output distribution with Venco Company. According to this agreement, Ukraine will receive not only finished products but also considerable investments. It gives us grounds to consider oil production in the Black Sea and the Sea of Azov now has some momentum. And that the plans are not just castles in the air but concrete activities.