speculation on the future of the Ukrainian oil and gas industry

Yuliya Tymoshenko is back and (I find the pun leaping to my typing fingers with the speed of inevitability) she's been cooking with gas. In addition to a whole raft of proposed economic reforms (including the TTI--Tymoshenko Transparency Index--which contains some admirable goals, but is ever-so amusingly self-absorbed) she's been promoting big-time gas and industry changes.

RosUkrEnergo and UkrHazEnergo

The new news is her statement that Yushchenko and the National Security and Defence Council have agreed to eliminate the RosUkrEnergo intermediary from Ukrainian-Russian natural gas trade. If true, this will be a victory for her, as she has long opposed the intermediary (for solid economic reasons, as described in detail in this article, though  the article does get embarrassingly laudatory at times). At another conference on the plans for her visit to Russia (Feb 21-22), Tymoshenko repeated that should be no intermediary. This despite the overall " harmony and understand" theme she was working on to try to put a diplomatic face on things (the Russian government has on occasion attempted to distance itself from RosUkrEnergo, likely because its lack of transparency makes it highly suspicious to the kind of energy investors Russia would like to woo, but has also never showed itself eager to eliminate the company from trade relations; Yushchenko has certainly couched his support for continuing the intermediary in "keep Russia happy" terms).

Moreover, Russia itself seems to be helping her. I thought I was going to be the first to make this connection and bring you some real news instead of bloggy conglomerations, but then I found this article at the Eurasia Heritage Foundation (anyone know something about this source?). The writer, John Marone, also noticed with interest the arrest of Seyon Mogilevich by the Russian government. The Eurasia Daily Monitor article details two prevailing theories on the arrest (that it was done by opponents of Medvedev to show they're still relevant or by Putin to put Mogilevich where he won't be talking to reporters), but Marone was more interested in how Tymoshenko might be able to use the arrest, since Mogilevich happened to be the major Russian participant in that very same RosUkrEnergo scheme.

He reports her statement on the arrest:

“The presence of additional middlemen is a sign of specific corrupt activities. The recent arrests demonstrate that the international community is following events and will not allow the development of any shadow models, including among states bordering the EU. Therefore, my position remains unchanged: all shadowy middlemen will be shut down.”

Nothing surprising there, but her discussions with them at the end of February should be fun to watch.

The White Line 

Simultaneously, she's kick-started discussion of another gas pipeline route, one that would bypass Russia but travel through Ukraine on its way to Europe. This comes at a time when another Russian-bypass pipe project proposed by EU countries themselves (Nabucco) has been foundering. (In an article called Pipedreams published the week before her announcement, Economist described the situation.)

How seriously should we take this? To put things bluntly: this sounds a lot like another Odesa-Brody pipeline and we don't hear much about that these days. Before Tymoshenko's White Line, it was the big pipeline project that was going to get Central Asian oil to Europe without Russia. As the linked RFE-RL article points out, though, Ukraine failed to find the oil to pump under Kuchma, and it's been pumping Russian oil the opposite way since 2004. While there is a prospective extension of that pipeline to Plock, there are still a lot of questions. To create another line to meet whatever unknown demand is left over with as-yet unknown supply does not seem particularly promising.

Nevertheless, even having the option on the table is a bargaining chip. And a reasonable argument can be made that a major reason for the failure of Odesa-Brody was a lack of government will to push it through and risk Russian retaliation (in forms such as raising the then-bargain natural gas rates), a lack Tymoshenko has never felt.

So throwing this idea sounds like fun to me, though I can't see why she called it the White Line and not something more like, say, TymoTunnel.

WTO and, Why Not?, the EU

Ukraine finished WTO bilateral negotiations this January (this was not a Tymoshenko thing; rather it was a steady if obscenely slow process pushed along by the last four government formations). Should the WTO officially welcome in Ukraine at its Feb 5 meeting, as Yushchenko has predicted, there will definitely need to be further reform and efforts to harmonize standards (referred to by the Ukrainian agriculture minister and indirectly by Yushchenko in his call for Tymoshenko to oversee the transition process for the grain sector). Nevertheless, Russian Finance Minister Alexei Kudrin makes his government look rather spiteful and self-absorbed for saying Ukraine (after fourteen years of negotiation; the first ten of which were a wash) has recklessly rushed in "on unfavorable terms just to get in ahead of Russia."

However long we've been waiting for this move, that Ukraine will be getting into the WTO soon is a reason for a little bit of celebrating. Tymoshenko did so by proposing that the EU join Ukraine in a free trade zone and share joint visas with it.

The strategy reminds me of an old Calvin and Hobbes comic I once read:

"Mom, can I set fire to my bed mattress?"
"No, Calvin."
"Can I ride my tricycle on the roof?"
"No, Calvin."
"Then can I have a cookie?"
"No, Calvin."
"She's on to me." 

Who knows, maybe the EU reps will be squishier than Mrs., uh... Mrs. Calvin's Mom. (Then can we have an EU *action plan*?...)