Ukraine’s Elections Highlight Deep Divides Over Natural Gas

In the nearly three decades since gaining its independence, Ukraine has been a country constrained by a closed, non-transparent energy sector. As the country seeks to improve ties with the West and ultimately integrate into the European Union, it has finally embarked upon a set of reforms aimed at creating a more transparent, market-oriented energy sector under incumbent president Petro Poroshenko.

The direction of Ukraine’s energy policies is of great interest to observers in Brussels and the European capitals, as a stable and prosperous Ukraine would increase overall European energy security. But those reforms have hardly gone uncontested. Instead, they have become a lightning rod as the country gears up for its presidential election in March, with Poroshenko pointing to endorsements from key outside stakeholders while his opponent and chief rival, former Prime Minister Yulia Tymoshenko, takes a populist approach that could potentially reverse some of the recent changes.

President Poroshenko’s Reforms

The International Monetary Fund (IMF) and EU have provided financial aid to Ukraine since the economic crisis brought on following Russia’s annexation of Crimea in 2014. In exchange, both organizations have stipulated the need to bring Ukraine’s energy policies in line with those of EU countries.

The government’s refusal to raise energy prices – which had been kept artificially low since the Soviet era – had prompted the IMF to freeze aid in April 2017. Finally, last October, Ukraine announced that it had secured a new $3.9 billion stand-by aid agreement with the IMF, but the government had to raise household gas prices by nearly 25% to meet the IMF’s stipulations.

Although it was an unpopular move with Ukraine’s citizens, with natural gas prices rising drastically since 2013 for household and industrial users, the government warned that Ukraine’s financial situation was dire and that the country could become insolvent without continued financial assistance. Poroshenko has credited higher prices in part for restoring profitability to the state-owned gas company Naftogaz, which produces about 80% of the country’s natural gas, and is the country’s biggest taxpayer.

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The following article originally appeared in EurActiv, a ...

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