Sunday, 10 March 2013

Ukraine Optimistic About Chances To Sign EU Deal

ROME, Italy -- Ukraine is on course to make required reforms to be able to sign a landmark treaty with the European Union this year, a senior official from Kiev said Wednesday. “There is no plan B,” Yulia Lyovochkina, a lawmaker who is part of the government’s delegation to the Council of Europe’s parliamentary assembly, said in an interview. She said Kiev had a “very optimistic feeling” after a Feb. 25 meeting with EU officials that paves the way for an association agreement to be signed in November. Reforms required involve a judicial and other overhauls, most of which are under way, she said. That said, she said it was her personal view that, even though Ukraine isn’t a member, the EU should exert more pressure on Russia to resolve a longstanding dispute over gas contracts that require Ukraine to pay billions of dollars even for fuel it doesn’t end up using. Under the terms of a 2009 deal signed by then-prime minister Yulia Tymoshenko, Ukraine says it’s paying Russian gas at prices well above the price paid for by Germany. The take-or-pay contracts cost an extra $6 billion a year, or 4% of gross domestic product, according to government officials. Russia has signaled it would change the terms of the gas deal only if Kiev agreed to join a Moscow-led Customs Union of former Soviet republics. That would dash any move towards closer integration with the EU, but “Ukraine has made its final choice” on that matter, said Ms. Lyovochkina, who has in the past noted that closer ties with the EU will impose costs on Ukraine in the early years. Ukraine is now importing gas from EU members, while also boosting efforts to increase domestic supply. Success in that will matter because Ukraine is also under pressure to reduce gas subsidies for its own population, a measure that would be politically unpopular and underscores how the contracts with Russia limit Kiev’s domestic policy margins to promote economic growth. “We’re getting there on that,” Ms. Lyovochkina said of domestic gas prices. She said the government is gradually reversing its domestic network scheme so that households are supplied with cheaper domestic gas while businesses pay higher tariffs linked to imports, the opposite of the current arrangement. Meanwhile, Ukraine has awarded shale-gas prospecting and extraction contracts to foreign oil majors, including Chevron Corp., Royal Dutch Shell and Eni SpA. Ukraine has an estimated 42 trillion cubic feet of technically recoverable shale-gas resources, equal to 40 times the amount that will eventually be shipped to Europe from Russia via the Nord Stream and South Stream pipelines, both of which have been designed to skirt Ukraine, the critical transit country for gas. Ukraine is also the world’s second-most attractive destination for solar-energy investors, said Adolfo Urso, Italy’s former foreign trade minister, adding that total trade between the EU and Ukraine could triple under a free-trade scheme the November deal should usher in. Ukrainian people are aware of the risks associated with shale gas – above all pollution of water tables through the hydraulic fracturing extraction process – but are warm to foreign investment projects, Ms. Lyovochkina said.

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