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EU, U.S. urge haste in Ukraine reforms
by Staff Writers
Washington (UPI) Dec 1, 2011

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The European Union and the United States this week urged Ukraine to enhance energy security by implementing the privatization of its state-owned natural gas monopoly.

EU leaders and their U.S. counterparts made the call Monday as part of an EU-U.S. meeting in Washington during which a wide range of energy issues were discussed.

One of the topics was Ukraine's cash-strapped state oil and gas company Naftogaz, whose privatization and breakup into separate transmission and production, transportation and sales components will be accomplished by the end of the year, Kiev has said.

Members of the U.S.-EU Energy Council, led by U.S. Secretary of State Hillary Clinton and EU High Representative Catherine Ashton, issued a statement Monday saying the reform of Naftogaz is an "urgent" matter that needs to be accomplished to secure Europe's energy security.

After praising Ukraine's February accession to the EU's Energy Community, which they called an important step toward increasing its trade and economic ties with Europe, council members said they felt the "urgency of Ukraine implementing the reforms in its gas sector."

The restructuring would, they said, "permit the international financial institutions and the private sector to invest in the modernization of the gas transit system," on which Western Europe depends for a large portion of its natural gas supplies.

Ukraine Minister of Energy and Coal Industry Yuriy Boyko said in September the restructuring of Naftogaz would be accomplished before the end of the year, with at least four new companies created and privatized.

The moves, he said, would raise $12 billion from foreign investors. One of them could be the Russian state-owned gas monopoly Gazprom, which is reportedly considering a partnership with the EU and Naftogaz to buy and upgrade Ukraine's vital gas transmission system, through which Russian gas transits to European customers.

The U.S.-EU Energy Council, which includes U.S. Energy Secretary Steven Chu and EU Commissioner for Energy Gunther Oettinger, urged Ukraine to move ahead with plans to accept partners for its gas production operations as well.

This, they said, is necessary to "attract international investment in the development of Ukraine's conventional and unconventional energy resources in a responsible and efficient manner, as well as promoting energy efficiency and renewable energy resources."

Ukrainian Prime Minister Mykola Azarov has said the reforms are awaiting the finalization of a renegotiated 10-year gas price agreement with Moscow, which multiple reports have indicated would include a slashing of gas prices charged to Ukraine in exchange for a stake in a privatized Naftogaz.

The Kremlin said in mid-November no deal had been reached.

Azarov has also indicated a $15 billion bailout program from the International Monetary Fund, on hold due to Kiev's reluctance to raise prices charged to consumers, would be back on track after an agreement with Gazprom is reached, The Wall Street Journal reported.

Disagreements between Ukraine and Gazprom over prices the utility charges have long contributed to tensions between the countries.

Gazprom's move to shut off gas supplies to Ukraine in a 2009 price dispute left European customers without gas for heat.

Ukraine is seeking a significant discount in the price it is paying for Russian natural gas, hoping to reduce costs from $355 per 1,000 cubic meters, which it says is the highest in Europe, to $230.

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