You're reading: Economy Ministry puts seizing control over Ukrtransgaz on hold

Ukraine’s Ministry of Economic Development and Trade, hit by strong criticism, suspended its decision to take over direct control over Ukrtransgaz, the operator of Ukraine's gas transportation system, from state-owned Naftogaz.

After the ministry changed Naftogaz’s statute without
warning on Sept. 7, international market watchdogs and creditors voiced
concerns, saying the government’s decision jeopardizes further financial help
for Ukraine, including $300 million and $500 million loans from the European Bank
for Reconstruction and Development and World Bank. It might as well risk
further stalling of the International Monetary Funde’s $17.5 billion bailout
program to support Ukraine.

Minister of Economic Development and Trade Stepan
Kubiv, talking in parliament on Sept. 19, admitted that “we did not have necessary
consultations” before making the decision, and promised to meet all interested
parties soon. However, he added, it is only “technical and political moments.”

In his words, the move was a part of Ukraine’s
commitment to unbundle Naftogaz, separating gas production, transit and sales
into separate businesses.

The Secretariat of the Energy Community, which
oversees the energy policy on the European market, said in its statement on
Sept. 17 that “this unilateral move is not in
line with the Resolution on Unbundling adopted by the government on July 1, nor
was it consulted with the Secretariat.”

According to the statement, the
Secretariat approved earlier resolution designed by Ukraine’s government that
envisaged “that a new transmission system operator is being established under
the control of the Ministry of Energy and Coal Industry to gradually take over
Ukrtransgaz’ activities.”

The Secretariat called upon the
Ukrainian authorities to “fully and swiftly” implement the Resolution on
Unbundling and follow Guidelines on Corporate Governance of State-Owned
Enterprises by The Organisation for Economic Co-operation and Development.
Otherwise, the situation may cause “enforcement action by the Secretariat,
jeopardize Naftogaz’s ongoing arbitration cases and endanger the role of
Ukraine as a gas transit country.”

In its statement, published on Sept.
16, Naftogaz said that with this decision, Economy Ministry “has breached
Ukraine’s commitments to its Western partners and international financial
institutions.”

The decision, Naftogaz said, does not
comply with EU energy market legislation, known as the Third Energy Package,
nor with Ukrainian law that regulates the natural gas market.

As a result, the transition of the
Ukrtransgaz under the Ministry of
Economic Development and Trade may cost Ukraine a $300 million loan for gas
procurement from the EBRD, as well as a $500 million loan from the World Bank,
aimed to ensure gas supplies in Ukraine during the upcoming winter.

Anton Usov, EBRD’s spokesperson, told
the Kyiv Post the institution was “concerned with the news.” In his words, the
situation with Ukrtransgaz has two troubling components: technical and
reputational.

“First of all, when such decisions
are made, there is a practice of acknowledging all the interested parties and
creditors,” he said on Sept. 19. “Secondly, and probably even more importantly,
the money were given to Naftogaz for certain processes of reforms… The
situation, when one of the key assets is taken out with just one stroke of a
pen, breaches the job that has been provided for a long time.”

Usov did not specify the consequences
of the move, saying “we are waiting now for the full clarity.”

“Based on what we hear, there is a
will [of Ukrainian government] to bring this process back into normal course
and discuss it further,” he said. “This will allow to remove the tension and
discuss it in civilized way, as it had to be done in the first place.”

A group of 26 Ukraine’s reform-minded
lawmakers, known as EuroOptimists, in their statement on Sept. 19, slammed at
the government for the move, calling it dangerous and inconsistent. They
demanded that the
Ministry of Economic Development and Trade explain its
decision to the EuroOptimists group, as well as to the energy parliamentary
committee.

Three deputy ministers with the Ministry of Economic
Development and Trade Max Nefyodov, Nataliya Mykolska and Yuliya Kovaliv said
in their joint statement on Facebook on Sept. 19 that they were not involved in
discussions considering the changes to statute of Naftogaz, and did not approve
them.

Kyiv Post
staff writer Alyona Zhuk can be reached at
[email protected]