Energy Security of Ukraine and the EU is Possible in Close Cooperation

ONovember 22, 2018, in Kyiv, the Centre for Global Studies “Strategy XXI”, in cooperation and with the support of the Konrad Adenauer Stiftung Office in Ukraine, has held the roundtable Strengthening energy security of Ukraine and the EU through the coordination and common actions based on the Association Agreement.

Problems of energy security of Ukraine and the EU, implementation of the Association Agreement in the energy dimension by all parties, legal framework and existing mechanisms for deepening cooperation between Ukraine and the EU in the gas sector, including the use of gas infrastructure, uncertainty of the future engagement of the Ukrainian GTS, plans to supply gas to the EU countries by routes, which do not take existing infrastructure into account, and other important issues were in the focus of the discussion.

President of the Centre for Global Studies “Strategy XXI” Mykhailo Gonchar, Acting Chairperson of the Verkhovna Rada of Ukraine Committee on Fuel and Energy Complex, Nuclear Policy and Nuclear Safety Oleksandr Dombrovskyi, Deputy Head of the German Embassy in Ukraine Wolfgang Bindseil and HeadoftheKonradAdenauerStiftungOffice in Ukraine Gabriele Baumann opened the discussion.

Welcoming the participants of the round tableMykhailo Gonchar pointed out the program speech of Vice-President of the European Commission Maroš Šefčovič at the XII Central European Energy Conference on November 19, 2018, in Bratislava, in which he stressed the need to preserve the transit of gas through the Ukrainian GTS. At the same time, according to M. Gonchar, the EU is unlikely to provide such guarantees, and the price of Russia’s “guarantees” is well known.

Oleksandr Dombrovskyi noted that energy security will be achieved if Ukraine is self-sufficient in energy resources, as today Ukraine has a surplus on electricity but a deficit in gas. He called energy efficiency the key issue for Ukraine’s energy security that should lead to reduction of domestic energy consumption. In the gas sector, according to him, problems of energy security in Ukraine should be considered in two dimensions: external dimension – prospects of bypass gas pipelines and their impact on Ukraine; internal dimension – the order of functioning of the Ukrainian gas transport system in these conditions. As for the latter one, Ukraine must complete the process of unbundling and find a reliable western partner. O. Dombrovsky noted that, inside the EU, there is a deep political conflict between the creation of the Energy Union and the implementation of the Nord Stream 2 project, and the consequences of this conflict should be taken into account by Ukraine. 

Wolfgang Bindseil said that the state of Ukraine’s energy security is now better than ever before, as the country began to consume less gas and carry out reforms in accordance with the Association Agreement. Meanwhile, according to his words,the process of unbundling should be completed as soon as possible, as it is a precondition for talks with Western partners on the further reliable transit of gas through the Ukrainian territory. Without rejecting the political component of the Nord Stream 2 project from Russia’s point of view, as Mr. Bindseil noted, it is a commercial project for European companies and another route of supplying gas for Germany. Therefore, according to him, the Nord Stream 2 gas pipeline will be built, and Ukraine needs to create conditions for attracting Western investments into its GTS and find powerful Western partners to counter challenges from the side of the Russian Federation.

Gabriele Baumann drew attention to the importance of building Ukraine’s relations with the EU in the context of the future transit and developing a clear vision of further cooperation with the European Energy Union.

In the key report of the event, Igor Stukalenko, Project Manager of the Centre for Global Studies “Strategy XXI”, said that the Nord Stream 2 project undermines the principles of the European gas market and, along with other factors and the blockade of Central Asian gas, reduces security of supply (SOS) and threatens the physical shut-down of gas transit through the Ukrainian territory to the EU, creating a danger of an “emergency situation” in the definitions of the Association Agreement. Therefore, the active application of the provisions of the Agreement, which determines direct bilateral relations in the gas infrastructure sphere, available tools, in particular the initiation of direct consultations, as well as the consideration of Ukraine’s interests in the system of security of supply (SOS) and long-term plans of the EU, is a way of counteracting threats to energy security. He concluded that the Association Agreement and the adoption of the EU gas legislation transform Ukraine into a part of the EU market that should give it the same rights in the gas sector, which the EU member states have.

Advisor of the European Network of Transmission System Operators for Gas Anton Kolisnyk presented the principles and key directions of ENTSOG activities, the procedure for implementing the emergency response mechanism, the level of involvement of PJSC Ukrtransgaz to the work of this Network and the possibilities, which ENTSOG provides to the Ukrainian gas transport operator. He also drew attention to the ENTSOG reports, which include risks and threats assessments and forecasts of the development of the situation on the European gas market.

Yelyzaveta Badanova, Deputy Head of the Legal Department at NJSC Naftogaz of Ukraine, said that the transit contract with Gazprom, which is valid until the end of 2019does not allow to complete the unbundling process in Ukraine. That is why Naftogaz of Ukraine tries to get consent from the Russian supplier to change the Ukrainian side of the contract, but Gazprom refuses to transfer the contract to a new system operator. Under such conditions, on her opinion, the process of unbundling can not be completed by the end of 2019, although the necessary preparatory work is carried out.

Oleksii KhabatiukHead of the Energy efficiency department at NJSC Naftogaz of Ukraine, said that the Nord Stream 2 is a “Trojan horse” for the EU that undermines the basics of functioning of the European Union because the project is aimed mostly against the EU than Ukraine. The representative of Naftogaz stressed that, in order to strengthen its own energy security, Ukraine should use internal reserves to reduce consumption, in particular: to streamline the system of payment for gas; to reform the subsidy system with the aim to re-direct it at stimulating energy saving; to modernise the Ukrainian GTS. 

Member of the Strategic Advisory Group for Support of Ukrainian Reform Karel Hirman called the Nord Stream 2 and the TurkStream as Kremlin’s geopolitical projects, which, meanwhile, have a certain economic component for Gazprom and the European energy companies, involved in the project. At the same time, Nord Stream 2 is a threat to German trading companies. According to assessments of the Slovak expert, to negotiate a further transit of gas through the Ukrainian territory, the European Union wants to receive from Ukraine a single vision of the future transit and to understand who will be an operator of the Ukrainian GTS.

Expert on energy issues of the Ukrainian Center for European Policy Dmytro Naumenko presented possible scenarios of the gas transit through Ukraine after 2020 in the context of implementation of the Nord Stream 2 project. He also noted that the voice of Germany had become increasingly important in the EU energy sector, and underlined that all the costs of the Nord Stream 2 project would ultimately be paid by German and other European consumers.

Summing up the discussion, the President of the Centre for Global Studies “Strategy XXI” Mykhailo Gonchar summarised:“We are accustomed to the idea that the Nord Stream 2 is already a reality. However, even if it becomes a reality, this does not mean that we must accept and stop opposing it. We need to be prepared not for Scenario B or C, but for Scenario X, when it is obvious what Russia will do against us and what Europe will not do for us, when the unknown quantities in the scenario of the next gas crisis will be more numerous than the known ones“.

Source: Centre for Global Studies “Strategy XXI”