Since the law “On the gas market” came into effect on the 1st of October 2015, Ukraine has made significant progress towards the liberalisation of its gas market, including decreasing its reliance on gas supplies from Russia, and overhauling old gas price subsidies. Sadly, the success of gas reforms has often been marred by the counter-productive actions of the Ukrainian government, as well as by the opposition of the gas industry’s power players who are reluctant to lose control over the country’s most lucrative sector.
As a result, what might have appeared as an achievement at first, can often be viewed as a mere window-dressing exercise to secure the IMF’s financial aid, and more broadly the political support of the West. In October 2017, the World Bank’s country director for Belarus, Moldova and Ukraine, Satu Kahkonen, commented to Reuters that Ukraine was “at a make-or-break point” vis-à-vis its overall reform agenda (06.10.2017).
Reforms are the key requirement for obtaining financial help from the IMF, which – as noted by the National Bank of Ukraine, is vital for the country’s financial stability (NVBusiness, 25.10.2018). Ukraine has long been due another, fifth tranche, of support; delayed because of the faltering reform process.
As of March 2018, the problem is yet to be solved. Shadow Governance Intel looks at the progress of gas reforms in Ukraine and explains how informal elite networks and power plays interfere with the political and commercial decision-making process.
- While the Ukrainian government is in talks with the International Monetary Fund about a new macro-financial assistance program, the IMF continues to tie its financial aid to the successful implementation of the original reform plans.
- At the heart of this standoff are liberalisation of gas prices and unbundling of Ukraine’s national energy giant Naftogaz, which – despite initial success – have stalled due to the political headwinds and opposition from vested interests.
- Overcoming this inertia will determine Ukraine’s future financial prosperity; however, the window of opportunity is closing.