When Ukraine decided to join the Energy Community in 2010, it was a clear sign of its intention to become part of the European energy market and to build a competitive market with strong interconnections with all its neighbours. As the European energy market is going through significant changes, Ukraine is about to redefine its role in European energy security while also contributing to the continent’s decarbonisation efforts.
Ukrainian Foreign Minister Dmytro Kuleba speaks to CEENERGYNEWS about the opportunities and challenges of the transforming energy landscape of Central and Eastern Europe.
Historically, energy security is a crucial aspect of policy considerations in Central and Southeast Europe. How do you perceive the role of Ukraine in the new European energy security architecture?
Energy security of Europe is as relevant as ever today and I am confident that intensifying energy cooperation in Central Europe is key to ensuring it. As an important energy player in this region, Ukraine puts all energy into making Central Europe a bulwark of European energy security.
Energy is not solely about economy and business, but also security and politics. This is why we need political leadership and consolidating Central European forces to ensure that the European energy market functions according to European rules and in the best interest of our European nations. At the end of the day, it’s our consumers who benefit from a well-functioning, reliable, predictable and diversified energy market.
I often tell my European friends and partners that we are in the same boat here. By strengthening our own energy security, Ukraine also strengthens the energy security of Europe and vice versa.
Ukraine has gone a long way over the past seven years from being fully dependent on Russia to establish a transparent and competitive energy market with European rules, which included President Volodymyr Zelenskyi’s administration decisive move to complete the unbundling of our state energy giant, Naftogaz, a reform previously stalled for years.
We have learned our bitter lesson: energy dependence means political vulnerability, while energy independence is political strength.
What are the biggest opportunities and challenges ahead of Ukraine’s gas market?
Ukraine is an integral part of Europe’s energy security network with its reliable gas transportation system and unique gas storages. Here is a historic paradox. In the 1970s, most natural gas for the Soviet Union came from rich gas fields in the West of Ukraine. After they were exhausted, those fields were transformed into gigantic underground gas storages. With an overall storage capacity of up to 37,8 billion cubic metres of natural gas, they still remain the world’s third-largest. It was only a few decades later that Russia would start developing rich Yamalo-Nenets and other gas fields and use natural gas as its political tool in Europe. Moscow extracted vast natural resources from Ukraine in Soviet times, but Ukraine is using the emptiness left behind to its advantage. Want to turn a vulnerability into strength? Ask us how.
However, the next few years are set to be quite challenging for the gas transit system of Ukraine. The current transit agreement with Gazprom provides for the reservation of Ukrainian GTS capacity until the end of 2024. Russia has tried for many years – and failed – to discredit Ukraine as a reliable gas transit partner. Now it tries to bypass Ukraine.
The Nord Stream 2 project, which will transport gas from Russia to Germany under the Baltic Sea, bypassing Ukraine is now about 95 per cent complete. What is Ukraine’s point of view on the pipeline?
It is still unclear why another pipeline would even be needed in the first place, as the existing gas transportation capacity fully covers not only the existing demand but also the export capacity of the Russian Federation. There is no market need, but there are clear political goals for Russia here: depreciate Ukraine’s role in European gas transit and weaken Ukraine in its resolve to Russian aggression.
One very important nuance here that commentators abroad frequently overlook: for Ukraine Nord Stream 2 is primarily a security threat, not an economic one.
Of course, losing transit revenues would be painful for our budget, but losing a critical infrastructure asset that Russia depends on to transit its gas to Europe is much more dangerous. The need to keep the Ukrainian gas transit system safe has always been a deterrence factor to prevent further expansion of the Russian military aggression against my country. Taking this factor out of the equation creates a threatening security disbalance.
And it’s not only about Ukraine, but a number of Central European states. The Nord Stream 2 violates the European principle of diversification, it is highly divisive and political. If completed, it will pose a serious threat to the energy security of Europe. We persuade our EU partners to be consistent in their policy towards this project for the sake of their own, not only our interests.
We understand the desire of European states to diversify their gas supply. At the same time, we think it is useful to maintain gas transit through Ukraine while receiving part of imports through, let’s say, Turkish Stream. This keeps supplies secure even if one of the two routes is unavailable. Dependence on one route, particularly from the Russian Federation, carries significant risks.
The impasse over Nord Stream 2 also affected transatlantic ties. US President Joe Biden is now meeting European leaders to revive the transatlantic partnership and formulate a shared stand on Russia. What are Ukraine’s expectations?
Our position is clear. It is not only about Ukraine and our economic interests. It is very dangerous for the overall Euro Atlantic security and unity to give such a powerful political weapon as Nord Stream 2 in Vladimir Putin’s hands. Compromises on security have never worked well in the past. Our main expectation is to convince our German and US partners to take the existing threat seriously. This is what Ukrainian diplomacy is currently working on.
In fact, there are many voices against North Stream 2 in Germany and Berlin’s position may change after their upcoming elections. Neither has the US given up on sanctions completely, saying it is rather a break. Our struggle to preserve Ukraine’s national interests and European security will continue. As one golden rule of diplomacy puts it, nothing is fully agreed before everything is agreed.
Ukraine’s recent commitments to carbon neutrality as well as implications of the European Green Deal adds new aspects to the traditional concept of energy security focusing more on decarbonisation. How does Ukraine plan to tap into the development of clean energy and what are the potential areas of cooperation with other countries in the region?
Renewable energy becomes a more and more important element of Ukraine’s energy independence.
We have an ambitious goal of decarbonising energy, industry and transport, which complements our broader strategy of integrating with the European Union. Part of this strategy is developing the use of “green” hydrogen.
Ukraine has tremendous potential in producing this new type of energy, which persuaded the EU to recognise our country as a priority partner in its Hydrogen Strategy for climate-neutral Europe until 2050. Respective bodies are now working on developing the Hydrogen Strategy of Ukraine. We continue large-scale work to assess the possibility of using our gas transit system for hydrogen transportation to EU countries. Ukraine will launch its first hydrogen pilot projects as soon as next year.
We are working on disconnecting the Ukrainian power grid from Belarusian and Russian ones and connecting it to the European one. This is technically challenging, but we plan to achieve this goal by the end of 2023, further contributing to the energy security of Ukraine and Europe.
Ukraine is eager to work closely with European partners to further secure reliable gas transportation as well as to develop renewables, including green hydrogen and wind energy. At the end of the day, we share the same aim: a stable and secure Europe. It is up to our leadership, political will and united efforts to achieve it.