#Commentary of Marina Zheynova on whose account Ukraine tackles problem of ‘energy dependence on Russia’
Ukraine’s power economy is falling rapidly into an abyss and, against the backdrop of an announced in October by the NJSC “Naftogaz” increase in gas prices for the population by 19% or 931 hryvnias for 1,000 cubic meters, Groysman’s fairytales about the monetization of subsidies are another lie. Since there is no money in the budget.
Let us first figure out what we need in order for an energy industry to work, to ensure the need for power and to have a transparent pricing policy, as exemplified by civilized countries. First of all, primary and secondary energy resources are monitored there: they draw a balance, they determine how much energy is needed – how much coal, oil, gas, electricity a country will consume. Each country makes its own balance, depending on the resources it possesses. Further they identify deficit, energy dependence and what needs to be purchased. Thus, prices and tariff policies are set.
We see a different algorithm depending on state’s resource characteristics. For instance, there are no primary energy resources in France — no coal, no oil, no gas and emphasis is laid on nuclear power. In Germany, for example, there is brown coal and, accordingly, the government of that country bases its energy policy on this factor.
And what happens in Ukraine? Ukraine has not had an energy balance since 2005. Energy is not that it is not coordinated, it is so overpoliticized that an ordinary citizen has no hope but to listen to empty, populist slogans and justification of another tariff escalation by the bright European future. Probably, it is for great-great-grandchildren.
The cost of energy in Ukraine is 5-6 times higher than common sense. The country’s energy strategy until 2035 does not withstand any criticism. Otherwise, you cannot call this document other than a science fiction. How can one plan and produce some calculations without an energy balance? How can the production of nuclear power plants be increased if, according to the technical characteristics, they will have already run out of their resources and their even extended lifespan will have ended by 2035? And would there be funding for the construction of new stations? But, there is a couple of in it, which say that Ukraine may expect energy famine by 2035. This is closer to the truth. Ukrainian thermal power plants and central heating and power plants are now depreciated by 80%.
I feel sorry for the ordinary citizens, they receive payments with sky-high sums for ostensibly European weal. No money? I am sorry, heat your homes with dung brick fuel then. (This is not my fantasy, but the proposal of the Deputy Prime Minister of Ukraine, Pavel Rozenko.)
And what is most exemplary – the Verkhovna Rada, despite permanent deputies’ deprivations, works. The laws on the electricity market are made. The second one has been made. The first one did not work. It will enter into force in 2019, but there is a problem: about 70 regulations need to be developed, four of them should have been considered in the second quarter of 2017, as well as a working group should have been established… Anyway, it remains a dead paper.
At the same time, there is another, no less interesting, structure – the National Commission for State Regulation of Energy and Public Utilities composed of seven people (composed of four at the moment; three of them have already been dismissed). This structure regulates everything, it has a turnover of about 400 billion hryvnias a year and protects the non-transparent and closed-off tariff policy.
Furthermore, let us touch upon the IMF’s requirements and how the authorities of Ukraine interpret them. We are talking about the NJSC “Naftogaz”. The restructuring of “Naftogaz” is the perennial theme of all candidates for senior posts in the last 10 – 15 years during pre-election races. But nothing has changed. Previously, “Naftogaz” had been financed from the budget, and it was not possible to do so in the midst of a huge budget hole. What does the IMF require? To improve the financial status of “Naftogaz”. Of course, by increasing tariffs. What does the Ukrainian leadership explain to the citizens? Let us finance “Ukrgazdobycha”, they will drill new wells, get gas and increase the country’s energy independence. The truth is that it has increased by 2% at the present time. And all hard-earned money and paid by Ukrainians for payment documents goes not to district heating company in order to modernize its worn-out heating networks (which is what the Ukrainian authorities yell about, raising tariffs), but to “Naftogaz’s” accounts. They have to improve financial condition upon the request of the IMF, hoping to receive another handout… Excuse me, trench.
But there is more to it. Coal! Here is a topic for profit. In fact, the prices of American coal for Ukraine have increased threefold compared to the last year. And this is an official data from the report of the US Department of Energy.
In the first quarter of 2017, coal for Ukraine costs 206 dollars per ton, while it was about 71 dollars per ton in 2016. And the Ukrainian president is not stingy to the praise of the American leadership, because Europe does not even want to talk to him anymore, which is why he announced a purchase of two million tons of American coal. The main thing is to keep sitting in the president’s chair and after us the deluge.
The interesting thing is that European countries buy coal at a reduced price. The Norway purchased coal at $140 in 2016, which is already $125 in this year.
Well, the “Rotterdam Plus” scheme is a wonderful invention! To begin with, first of all, the so-called API2 index shows the price of carbon-stamped coal, not anthracite, which is in low supply in Ukraine. Second of all, the price of coal for state-owned mines is set by the Ministry of Energy and coal industry manually.
Simply put: it is not coal from the Rotterdam port with transshipment, freight and delivery to the destination. And it comes from shill documents in a variety of roundabout ways. They earn about 10 to 15 billion rag a year by taking last hard-earned money out of Ukrainians’ pockets.
At the same time, according to the current president of Ukraine, the authorities of the state eliminate a corruption component of the country’s energy security issue, which is allegedly not the case for the predecessors. In particular, the supply of Russian gas is attributable solely to corruption of all Ukrainian authorities before the election of Poroshenko.
ʺWe were forced to our knees,ʺ the Ukrainian guarantor said pompously, commenting on the ‘old energy dependence on Russia’ situation. But, however, he modestly concealed that no one other than him personally and the government entrusted to him has failed so much to achieve this goal…
Marina Zheynova, the DPR People’s Council deputy