Yanukovych denies reports of pipeline privatization plans

Ukrainian President Viktor Yanukovych raised the possibility of creating a trilateral natural gas transit consortium involving the European Union. “Today there’s a great desire to create a consortium ‘Ukraine-Europe-Russia’,” the president told a meeting with the parliamentary leadership and faction heads. He asked for their participation in reaching a decision on the consortium.

Yanukovych also said his administration had no plans to privatize Ukraine’s gas transit system. “In general, the word ‘privatization’ was never used in any negotiations,” he said. “Not with anyone. We didn’t use the word ‘privatization.’ That’s all rumors and guesswork, possibly even a provocation.”

Alexander Paraschiy: There has been great speculation recently that the Yanukovych administration is planning a sale of the gas transit system to Gazprom, with good reason. At the end of April, the Cabinet of Ministers submitted to parliament a bill that involved lifting a moratorium on selling the gas pipeline. The authorities tried to present the initiative as a step towards implementing the European Energy Charter requirements. Additionally, top Ukrainian officials had been discussing some consortium to manage the pipeline based on EU rules. In fact, the Energy Charter doesn’t regulate forms of ownership for the energy transit infrastructure but requires equal access to the infrastructure to all players.

At the same time, the key potential consortium participant – the Russian Federation – has yet to announce its approval for granting equal access to pipelines and hasn’t ratified the Energy Charter. So the messages from Ukrainian authorities about a consortium based on EU principles have been quite contradictory, indicating that some other reason was behind the bill (presumably the pipeline’s sale to Gazprom, whether or not it’s called “privatization”).

With his comments, the president has added more confusion to the situation in stating that he wants a trilateral consortium, despite holding negotiations with Russian leaders several times this year that excluded EU representatives. Moreover, Russia isn’t committed to EU rules. So it looks like there is no consensus on gas pipeline’s prospects within the Yanukovych administration, which is still weighing the pros and cons of changing the status quo.