The gas problem has become a key factor of pre-election politics in the past few days. We would even welcome it if this were the last year of our life in this country. On Dec. 16 Prime Minister Yuriy Yekhanurov (No. 1 on Our Ukraine’s list), promised that household gas would not go up in price even if Russia’s Gazprom raised its payment rates. (Meanwhile, Naftohaz Ukrainy is demanding that gas prices be increased by 25 percent on Jan. 1, 2006, and domestic production boosted.) “The populace won’t feel any changes,” the prime minister said, adding that Ukraine produces about 20 billion cubic meters of gas.
President Yushchenko outlined his government’s gas strategy in more realistic terms and in greater detail. “The idea that we have offered to the Russian side is that the part that does not fit in with the new liberalized tariffs and prices should appear on the Ukrainian market at a liberalized price and be utilized, as a rule, in Ukraine’s industrial sector. This concept means that liberalized prices should be applied to the industrial sector, while the private and utilities sectors could finish the season with the current prices or with a slight price increase in the second quarter of the year,” the president said. He went on to say that if transit fee were raised, Ukraine could pay for Russian gas at the new prices, provided supplies were cut a little. We will therefore have to buy a few billion cubic meters outside the “transit-purchase” parity scheme. Yushchenko re-emphasized that the Ukrainian side is insisting on a step-by-step approach to payments for Russian gas with real money. Most of the industries that consume Russian gas will be able to endure the price hike and remain competitive, but the chemical sector may pose a problem, the Ukrainian leader said.
The president’s rather excessive optimism is offset by his somewhat belated but undoubtedly correct concern to make the Ukrainian economy less power-intensive. Ukraine’s economy should also affect the communal consumption of gas, i.e., by the population and the budgetary sphere. The president said that Ukraine needs a new energy concept based on fresh approaches to coal mining, nuclear power, extraction of gas on the Black and Azov sea shelves, and utilization of alternative sources of energy. “My goal is to ensure Ukraine’s complete energy independence,” the head of state summed up rather dramatically. Still, some questions should be directed to the president — of course, not about who was the first to cook up this gas stew: such questions would sound odd when the stew is just about to be eaten. But why are such strange staff appointments being made at Naftohaz Ukrainy, a state- run enterprise that is playing a pivotal role in this quandary? Is the Presidential Secretariat placing its commissars on the basis of kinship (Ihor Vasiunyk, brother of Ivan Vasiunyk, first deputy head of the secretariat, was appointed deputy chairman of this company)?
But these are minor details, as they say. There are diametrically opposing views on the gas problem in Ukraine’s political spectrum. For example, the Popular Movement of Ukraine’s parliamentary faction took a radical stand and demanded that the National Security and Defense Council, Verkhovna Rada, and Cabinet of Ministers retaliate against Russia by bringing payments for the Black Sea Fleet base on Ukrainian territory up to the world price level.
Faction member Oleksandr Tkalenko noted quite aptly that the amount the Russians pay for their naval base in Ukraine — slightly more than $97 million a year — is several dozen times lower than it should be. “We think that the solution to this problem can be a powerful lever in bilateral relations and the gas dispute between Ukraine and Russia,” Tkalenko said. There seems to be no need to comment on this, but let us quote the ironical reaction to this by Vice-Speaker Adam Martyniuk who said, “The more statements like this, the warmer we will feel in winter.”
Anatoliy Kinakh, Secretary of the National Security and Defense Council, was also in the center of this verbal exchange. “I am very much upset that, although the decision (to establish the Yushchenko-Putin Commission) was made in the spring of 2005, the commission is still idle, and we feel a very serious shortage of systemic professional contacts to discuss the whole range of Ukrainian-Russian relations and cooperation. Both sides should not allow the “work connected with the strategic partnership to be supplanted by emotional political declarations,” Kinakh said. Accordingly, Sergei Mironov, Speaker of Russia’s Council of the Federation (upper chamber of parliament), who predicts a successful outcome of the Ukrainian-Russian negotiations, also quotes our president. “All attempts to reduce the whole problem to paying for the Black Sea Fleet base are futile and run counter to what President Yushchenko wishes. He said that an economic question should not be looked at through a political prism.” Of course, there are far more gas-nurtured hawks in the Russian Duma than in Ukraine — suffice it to recall Russia’s reported intention to resume collecting VAT on gas supplied to Ukraine in the country of origin. Last Friday the Duma ratified a pertinent question addressed to the head of the Russian government. The lower chamber has raised the question of revising the existing system of Russian-Ukrainian economic relations, although even there some sound-minded MPs spoke out against this stupidity.
Even in this situation, Ukraine should not panic. As long as it is possible, we must defend our position by relying on existing documents and displaying reasonable flexibility. Our main trump card should be based on well thought-out plans of energy conservation and increased extraction of our own energy resources. We have two pieces of good news in this respect: the cabinet will soon confirm the conditions for inviting bids for prospecting and extracting oil and gas on the Black Sea shelf, and will also create an energy conservation agency.
A reader named Adam Smith recently sent us a letter to the editor, containing his take on the gas problem. He recalled the US’s experience in energy saving and described a lot of appliances that allow that country to save fuel. “Ukraine has still not fully mastered the culture of fuel conservation, but it should go down this path,” says the namesake of the great economist.
