Publication: Eurasia Daily Monitor Volume: 3 Issue: 52

Ukrainian President Viktor Yushchenko and some government authorities seem again to endorse the deeply damaging gas deals signed on January 4 and February 2 with Gazprom’s shadowy offshoot RosUkrEnergo. Yushchenko had ignored widespread criticism of those agreements, until unpublicized U.S. and EU intercessions persuaded him to shelve the deal, pending the March 26 parliamentary elections and formation of a new government that could exclude RosUkrEnergo from whatever agreements are eventually reached with Moscow.

In a March 14 news conference, however, Yushchenko again defended those deals. He argued that:

a) RosUkrEnergo would only operate on Russian territory, not in Ukraine;

b) the Russian state, not Ukraine, had designated RosUkrEnergo as the transit operator;

c) official Kyiv has appealed to the Russian government, Gazprom, and Raiffeisen Bank for help to find out who is behind RosUkrEnergo, but has not found out;

d) Kyiv is satisfied that no Ukrainian state entity is among RosUkrEnergo’s owners.

The implication is that Ukraine has done what it could in this regard and the deal with RosUkrEnergo can go ahead (Ukrainian Television Channel One, March 14). Minister of Foreign Affairs Borys Tarasyuk also declared in Washington that the gas deal will be implemented for lack of other options, despite its being “far from transparent” and other flaws (Action Ukraine Report, March 12).

Yushchenko’s four arguments had long been disproved by critics and the leaked texts of the originally secret agreements:

a) RosUkrEnergo would operate within Ukraine as well, through the UkrGazEnergo joint company set up by RosUkrEnergo with Naftohaz Ukrainy, sharing Ukraine’s internal distribution market;

b) a few key Ukrainian government officials worked with the Russian side to insert RosUkrEnergo into these deals;

c) official Kyiv prefers to plead ignorance or agnosticism about RosUkrEnergo and other shadowy aspects of the gas deals, ever since the presidency last September quashed the National Security Service’s investigation into the matter; and

d) Kyiv is not addressing the high probability (widely reported by the Ukrainian press) that influential Ukrainian individuals with official connections may be involved with RosUkrEnergo and Gazprom.

Thus, the president’s comments seem to presage an attempt to rehabilitate and reactivate these discredited agreements in the post-election period. Yushchenko had initially gone all out to advocate for this gas deal, but changed his stand suddenly on February 14, when the presidential press service announced in his name that the deal was on hold due to lack of information about RosUkrEnergo and concern about damage to Ukraine’s own business reputation (Interfax-Ukraine, February 14). For the next 30 days, the president avoided addressing this subject publicly. His March 14 remarks fit in with ongoing moves by other Ukrainian authorities to begin implementing the gas deal while the public’s attention is riveted on electoral politics.

On March 9, Ukraine’s National Energy Regulatory Commission awarded a five-year license to the UkrGazEnergo closed joint-stock company to deliver gas on Ukraine’s internal market. UkrGazEnergo is a joint venture of RosUkrEnergo and Naftohaz Ukrainy and was created by the secret February 4 agreement that triggered a storm of criticism when it was leaked. Thus, Gazprom — acting via RosUkrEnergo and UkrGazEnergo, is capturing a share of Ukraine’s market and access to the internal infrastructure. The Regulatory Commission’s move also seems designed to make certain that RosUkrEnergo via UkrGazEnergo enters Ukraine to stay. (Interfax-Ukraine, March 9)

In a March 14 news conference, Ukraine’s Anti-Monopoly Committee chairman Oleksiy Kostusyev informally gave RosUkrEnergo a clean bill of health. Declaring, “there is nothing hidden there,” Kostusyev explained. “The entire information on RosUkrEnergo is classified as confidential or for official use only, and can only be released at the request of courts or an official investigation” (Interfax-Ukraine, March 14). This statement would seem to contradict Yushchenko’s comments made that same day. Kostusyev is a candidate for parliament for the Party of Regions. However, support for RosUkrEnergo and UkrGazEnergo by a handful of strategically placed officials clearly cuts across partisan lines, given the fact that Ivchenko is Yushchenko’s choice for Naftohaz chief and his political ally in the Our Ukraine bloc.

Taken together, these moves seem designed to keep the January 4 and February 2 agreements alive, implement at least some of their provisions, and cement RosUkrEnergo’s role as intermediary. If this is done, Kyiv would severely weaken its case for dropping out of that agreement after the election (see EDM, February 16, 17, 23).