Реформа энергетического комплекса на Украинеenglish

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Hans van Zon

Conference “Geopolitical and geoeconomical problems of Russian-Ukrainian relations

(estimations, prognoses, scripts)” - January, 2001

11

THE REFORM OF UKRAINE'S ENERGY COMPLEX

AS A PRECONDITION OF ELIMINATING

UKRAINE'S ENERGY DEPENDENCE

Only 16 per cent of Ukraine's gas and 13 per cent of its oil is produced domestically and more than half of Ukraine's imports consist of energy. During the first half of 2000, 50.2 of Ukraine imports consisted of fuels. Most of energy imports originate in Russia. This energy dependence upon Russia and problems to pay for energy deliveries is perceived as a big threat to Ukraine's sovereignty. Unauthorised siphoning of gas destined for Western Europe urged Russian Gazprom to start negotiations about a gas pipeline bypassing Ukraine. This would bereave Ukraine of a major source of income, i.e. between one quarter and one third of its domestic gas consumption.

Ukraine's energy dependence upon Russia and security threats involved are investigated in this contribution.

It is argued that with a reform of the energy economy, energy dependence would be very limited. The level of energy dependence is, among others, dependent upon the levels of domestic energy consumption and production. Energy consumption is very high due to lack of incentives to economize on energy consumption. Domestic energy production could be more efficient and much more cheaper if proper incentives would be in place. The payments crisis and the parasitic role of energy traders constitute the root of the current energy crisis. The obstacles that prevent a reform of the energy economy are the same that prevent Ukraine reducing its energy dependence.

First problems of energy consumption, trade in energy and the energy payments crisis are analysed. Subsequently domestic energy production is looked at. Then the results of the reform of the energy sector of the Yushchenko government are dealt with. Finally, energy imports and energy dependence upon Russia are analysed.

1. Wastage of energy

In Soviet times, enterprises and households did not have any incentive to economise on energy consumption. All houses had central heating and costs of heating were included in the very low fixed rent. Enterprises consumed huge amounts of energy that was delivered for a very low price because the Soviet Union had enormous amounts of energy reserves. Moreover, all enterprises were faced with soft budget constraints: the state would automatically cover losses. It made the Soviet Union one of the most energy intensive economies in the world.

After the independence of Ukraine the situation changed. Ukraine imported more than half of the energy it consumed and soon Ukraine had to pay the world market price for the oil and gas that was mainly delivered by Russia. In three years time the price went up from approximately 15 per cent of the world market price to the world market level. Although not all delivered energy was paid for (Russia continued to subsidise Ukraine although regularly cutting of supplies) and Ukraine started to indebt itself, the change-over had an enormous impact upon the economic situation in Ukraine. It contributed to the economic collapse (a 65 per cent production decline from 1991-1996) and partly explains why Ukraine was performing so much worse compared to Russia.

Although Ukraine had to pay much more for the energy it consumed, the wasteful attitude of households and enterprises towards energy use hardly changed. Households still generally do not have thermo-regulators and do not have individual gas meters.

Although households had to pay more for the energy they consumed they were not given the means to diminish energy consumption. Households pay a fixed amount for housing services related to the number of persons living in the house and the useful living space. For example, a household, with one adult and one pensioner, that owns a house that formerly belonged to Zaporozhstal in Zaporizhzhya and still profits from its housing services regime, with discount, with 31 square meters useful living space, pays for housing services (tax, electricity, gas, warm water and central heating) 37 hryvnas (approximately 7 dollars) per month. A household with two children, one adult and on top one pensioner with discount, with 66.4 square meters living space, pays 26.5 hryvnas a month for hot water and 38.5 hryvnas for central heating. On top of that 24 hryvnas is paid if 200 kWh electricity is consumer (payments for electricity varies between 24 and 48 hryvnas a month. (December 2000). It means that this family pays for energy between 89 and 113 hryvnas (between 17.8 and 20.5 dollars). It is obvious that in the first case mentioned amount, if paid, can not cover real costs of energy consumption. Still many houses fall under special housing services regimes. In the second case, when energy costs are based on commercial calculations, in most cases families can not pay the full bill.