Publication: Eurasia Daily Monitor Volume: 5 Issue: 140

Ukrainian Prime Minister Yulia Tymoshenko has refused to approve using the Odesaa-Brody pipeline for pumping Caspian oil to the Pryvat Group’s refineries. The pipeline, Odessa-Brody, is currently used by Russian oil companies in the reverse direction, Brody-Odessa. President Viktor Yushchenko’s team is accusing Tymoshenko of disregarding national interests and even treason. Tymoshenko accuses her opponents of corruption.

The pipeline Odessa-Brody was completed in 2001 to pump Caspian oil to Ukrainian and Polish refineries. It was part of plans devised under then- President Leonid Kuchma to diminish Ukraine’s dependence on Russian energy resources. Ukraine, however, could not obtain oil for it from Azerbaijan or Kazakhstan as it had hoped, although the European Union and the United States supported the project politically. Lacking Caspian oil, the Odessa-Brody pipeline since 2004 has been serving TNK-BP, LUKoil, and other Russian companies, pumping their oil in the reverse direction, to Odessa, where it is loaded onto tankers for export.

Kyiv never abandoned the original plan for Odessa-Brody. At the end of June, Yushchenko and Azerbaijani President Ilham Aliev agreed that a certain amount of oil would be transported to Odessa and pumped through the pipeline for testing (Interfax-Ukraine, June 30).

Tymoshenko forbade government officials to attend a meeting at the presidential secretariat on July 16, at which it was planned to agree on conditions for Caspian oil transportation via Odessa-Brody in the original north-western direction. UkrTransNafta – the state-controlled operator of Ukraine’s trunk pipelines – was supposed to sign at this meeting a contract with Milbert Ventures, which is registered in the British Virgin Islands and is linked to the Dnipropetrovsk-based Pryvat group (Kommersant Ukraine, July 18).

Yushchenko’s envoy for international energy projects, Bohdan Sokolovsky, announced on July 17 that agreements had been ready for signing at the preceding day’s meeting. Specifically, 5 million tons of Caspian oil were to be supplied to the Halychyna and Naftokhymyk Prykarpattya refineries in western Ukraine, and another 3 million tons to Central European countries, over the next two years. Pryvat controls those two Ukrainian refineries, which have been short of crude for processing during the past year or so.

Sokolovsky accused Tymoshenko of disrupting the agreements reached with suppliers in Azerbaijan and potential consumers in Central Europe. “This is shocking,” said Sokolovsky. “Those actions [by Tymoshenko] can be qualified as treason. I am sure that sooner rather than later, even if we have to gather at the National Security and Defense Council for that, we shall secure implementation of this project, which is in the national interest of Ukraine” (Liga.net, July 17). The head of Yushchenko’s secretariat, Viktor Baloha, warned Tymoshenko against interfering in energy security matters. “European energy policy and Ukraine’s role in it is at stake,” Baloha warned (Ukrainska Pravda, July 17)

Tymoshenko, however, dismissed the contracts proposed by Yushchenko’s secretariat to pump Caspian oil via Odessa-Brody as “another illegal scheme masterminded by the presidential secretariat”. She said that the contracts were to be signed with “off-shore companies” that had “nothing to do with international projects.” She also drew parallels between this project and the controversial deals of the presidential team with the RosUkrEnergo and Vanco companies (Interfax-Ukraine, July 17).

Earlier this year, Tymoshenko had unsuccessfully tried to banish RosUkrEnergo – the monopoly supplier of Gazprom’s gas to Ukraine since 2006 – from the Ukrainian market. Her government also withdrew from the contract to develop oil and gas resources in the Black Sea with a subsidiary of the US company Vanco. Tymoshenko insisted that the corrupt interests of previous Ukrainian governments were behind the two projects (see EDM, June 4, July 2).

Tymoshenko apparently believes that the contracts with Pryvat were intended to give that company full control over the Odessa-Brody pipeline for many years to come. According to parliamentary deputy Serhy Pashynsky from the Yulia Tymoshenko Bloc, who sits on the parliament’s energy committee, Pryvat would have taken Odessa-Brody under its control for a 14-year term, had the contracts with Milbert Ventures been signed. The Russians are also unhappy. Sources at LUKoil and TNK said that they had not been notified of Kyiv’s immediate intention to start pumping Caspian oil through the Odessa-Brody pipeline (Kommersant Ukraine, July 18). Russian Deputy Prime Minister Igor Sechin expressed concern over the plans, saying that the affected Russian companies would have to seek other routes for delivering their oil to EU countries (Interfax-Ukraine, July 21).

Pryvat was among Tymoshenko’s allies in 2005-2006, when rival Ukrainian tycoons such as Viktor Pinchuk and Konstantin Grygorishyn voiced suspicions that Tymoshenko was backing Privat in property disputes with them. Ihor Kolomoysky, the informal leader of Privat, admitted that his and Tymoshenko’s interests “coincided” at that time. Later on, however, Pryvat fell out with Tymoshenko, and she accused Pryvat of foul play on the energy market (Channel 5 TV, March 28). In one of his most recent interviews, Kolomoysky said that he would back Yushchenko’s re-election bid against Tymoshenko’s possible candidacy, and that he would consider leaving Ukraine if she became president (Ukrainska Pravda, March 28, April 2).