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Analysis & Opinion
25.03.09 Ukraine: A Trustworthy Ally?
Comment by Dmitry Babich

The negative reaction from Russia’s Prime Minister Vladimir Putin to the recently signed deal between the EU and the Ukraine on the modernization of the latter’s natural gas pipeline system was perceived as a sign of success in Kiev and in several other East European capitals. Newspapers in Poland and Ukraine wrote about the “Russian hysteria,” as if sidelining Russia in the energy dialogue between the East and the West could somehow serve their interests.

Meanwhile, this “hysteria” is understandable in the light of the EU’s willingness to carry additional financial burdens in a bid to achieve dubious political aims. These aims appear to include almost unconditional support for the divided and unreliable Ukrainian political elite. “Ukraine should really set out to discredit the North Stream and the South Stream. Spending just several dozen million dollars, we shall save billions,” the former Ukrainian Foreign Minister Volodymir Ogryzko said at a meeting of the National Security Council several weeks ago, while he was still the head of Ukraine’s diplomacy. Ogryzko was voted out of office by the Ukrainian parliament two weeks ago.

“Whether the Eurocrats wanted this or not, the gas conference in Brussels and the declaration signed after it create huge difficulties for the realization of Vladimir Putin’s two most ambitious projects – building two pipelines bypassing Ukraine,” Ukraine’s most popular online newspaper Ukrainska Pravda said. “Moscow’s nervous reaction to the declaration of intentions signed in Brussels means that the Ukrainian action hit the spot.”

It is clear that the declaration signed in Belgium will be presented by Ukraine’s unpopular President Viktor Yushchenko as his own achievement. Without ceding the ownership of the formally state-owned pipeline, built back in the Soviet times, Ukraine gets a loan of $2.5 billion under very favorable LIBOR terms from the largest European banks – the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB) and the World Bank (WB). In return, the Ukrainian government took upon itself seven obligations, which are part of the text of the declaration. They include finding an independent operator of the “modernized” pipeline system, creating a transparent, market-oriented mechanism of determining the tariffs, and giving third parties access to underground gas storages.

EU officials seem to have forgotten that just two weeks ago Ukraine’s President Viktor Yushchenko and his Prime Minister Yulia Tymoshenko had an ugly row while deciding whose allies should control Gazprom’s gas in the underground storages of Ukraine. Ukraine’s Security Service (SBU) with its masked commandos was used as a tool for snatching control over these assets from Tymoshenko’s supporters in the state-owned company Naftogaz. In retaliation, Tymoshenko accused Yushchenko of abusing his powers and countered by a similarly organized police raid. To expect from these two people that access to these same underground storages will be given to some “third parties” appears somewhat idealistic. But the EU officials are obviously prepared to believe Ukraine’s embattled leadership.
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