Who should complete for the Odesa-Brody project and how much it will cost

On November 1 the National Security and Defense Council of Ukraine (RNBOU) announced that energy source diversification decisions are not being fulfilled satisfactorily.

The RNBOU session presided over by President Leonid Kuchma “noted the unsatisfactory fulfillment of the RNBOU resolution of February 14, 2000, enacted by a Presidential decree on March 10 of this year. In particular, criticism was leveled at how work is being done to diversify energy sources, complete the Pivdenny- Brody oil pipeline, and create a suitable environment for the Eurasian Oil Transport Corridor (EOTC).” The session pointed out that the government had not drawn up a package of foreign political and economic measures to support the EOTC. In particular, it failed to hold talks with the countries and major companies participating in the extraction and sales of Caspian oil, such as Chevron, British Petroleum, Exxon-Mobil, etc. The Ukrainian side has confined itself to small talk and presentations, with the result that none of the big companies has shown any interest in the Ukrainian part of the oil transport corridor.

According to session participants, Ukraine holds a strategically important geographical place along the route of most attractive energy flows and should “take advantage of the current dynamic redistribution of the power- supply structure in the Eurasian geoeconomic zone. The Ukrainian leadership regards the EOTC and its Ukrainian components, the Pivdenny oil terminal and the Pivdenny-Brody- Poland oil pipeline, as one of the important elements of the trans- European system of energy resource supply.” As Yevhen Marchuk, RNBOU Secretary, told The Day, it is planned to overcome the shortcomings by forming a coordination body headed by a special presidential representative, perhaps with the status of roving ambassador, which characterizes the importance attached to this field by Ukraine’s leadership. Special groups of diplomats are to be formed in the embassies of some countries.

A number of economic and political measures have been suggested as far as Ukraine’s participation in the EOTC is concerned. In particular, the government has been instructed to urgently identify project funding sources (it is strange that the government has not yet deigned to do so) and make a final decision on setting up an international consortium to implement the Ukrainian part of the Eurasian Oil Transport Corridor. The RNBOU laid special emphasis on guarantees for investors. This is directly connected with the search for sources of funding, because it will take at least UAH 600 million this and next year to complete the project’s first stage. The budget does not provide for such money, nor does the Druzhba Enterprise, in charge of the oil pipeline construction, have such funds.

President Leonid Kuchma especially urged all branches of power to rapidly coordinate their activities to implement the project, complete talks with all potential partners, and extend additional guarantees to foreign investors. He also suggested that legislation be amended with the aim of creating economically sound conditions for investment in and the functioning of the project, as well as taking additional measures to forestall any negative ecological consequences that could arise in the EOTC’s Ukrainian section. The session also discussed other measures designed to protect Ukrainian national interests within the context of the diversification of oil supply sources and furnishing the Ukrainian economy with other energy resources. This RNBOU decision will be put in force by a decree of the President of Ukraine, Interfax- Ukraine reports.

One should not interpret the EOTC project and the current measures to speed up its construction as anti- Russian measures. The Day’s experts note that Ukraine’s diplomatic tone is quite easy to understand in this context: while the government was preening over its supposed triumph in bypassing Russia on the bottom of two seas, the latter managed to come to agreement with the EU about boosting its deliveries of natural gas to Europe, de facto forcing the RNBOU to make up for the blunders of a government, which simply talked instead of doing practical work on the decisive track.

The National Security and Defense Council also instructed the relevant ministries and agencies to check technical condition of the Chornobyl Nuclear Power Plant and the observance of international safety standards, as well as to study the possibility of delivering fresh nuclear fuel to the station within the next few months.

The RNBOU discussed and approved the work the State Railroad Administration had done to carry out measures aimed at raising the efficiency and solving the problems of railroads, and ordered the Cabinet and Ministry of Transport to continue their efforts to raise the efficiency of railway transportation.

In the nine months of the current year, Ukrainian railroads have pulled in UAH 7.4 billion in revenue, a UAH 1.9 billion increase over the same period of the previous year, have made all budget payments, paid off all Pension Fund arrears, and made timely payment for electricity consumed. Railroads have reduced barter settlements for their services, paid all back wages, and twice this year raised average monthly wages.

RNBOU Secretary Yevhen Marchuk was instructed to continue to monitor the fulfillment of presidential decree No. 603 of April 20, 2000, On the RNBOU Decision of April 11, 2000, On the Condition of Ukraine’s Railroad Transport and Measures Taken to Ensure its Efficient Functioning.

The RNBOU discussed the mechanism of Ukraine’s military reform from January 1, 2001 on. These measures were considered within the context of the main results achieved during the first and second stages of the state program of building and developing the Armed Forces in 1997-2000, as Minister of Defense Gen. Oleksandr Kuzmuk, reported.

Meanwhile, Secretary of the National Security and Defense Council of Ukraine Yevhen Marchuk is now visiting Poland in a bid to clarify the problems of the construction of the Odesa- Brody-Gdansk oil pipeline, Radio Liberty reported last Friday. According to this report, Mr. Marchuk noted that information about Ukraine rejecting European integration is a media exaggeration and the strategic course of Ukraine toward the West has remained unchanged. Mr. Marchuk was received by President Aleksander Kwasniewski of Poland and held talks with his counterpart Marek Siwiec and Minister of the Economy Janusz Steinhoff. According to Radio Liberty, Mr. Marchuk expressed confidence that “the deepening of relations with Russia is not of an anti-European nature, while Ukraine’s relations with Russia and the West do not run counter to each other.” Speaking about the construction of a transport corridor bypassing Ukraine, Mr. Marchuk pointed out that Poland would earn an annual $1 billion for fuel transit but simultaneously would “get a big minus in other spheres, particularly, in the relations with Ukraine.”

INCIDENTALLY

In an interview with the Polish newspaper Rzeczpospolita (November 3), Yevhen Marchuk said, “When it comes to the gas pipeline, we should not think in categories of insults or suspicions.” He admitted Ukraine does not support the construction of a gas pipeline bypassing its territory. “But, with due account of reality, we have to consider Ukraine’s possible participation in this project. We can and must speak with Russia about full utilization of our existing network as well as about participation in the construction of the Russia-Europe gas pipeline,” Mr. Marchuk said.

The newspaper says Ukraine is quite interested in the completion of the Odesa-Brody-Gdansk oil pipeline and suggests establishing an international consortium to finish construction of and then operate the line. “We want Poland and Ukraine to dominate in this consortium,” UNIAN quotes Mr. Marchuk as saying in this connection. According to him, the oil pipeline’s Ukrainian part and the terminal will be completed in January-February 2001 and the second half of the next year respectively. He noted that the RNBOU decision about the consortium creates additional guarantees for investors and attraction for its participants, suppliers, and consumers.

Polish President Aleksander Kwasniewski, accompanied by representatives of Polish firms interested in the oil pipeline, is expected to visit Ukraine later in November, the newspaper writes.

Last Friday, speaking to EBRD President Jean Lemierre, Leonid Kuchma advanced the idea of the participation of three sides (Ukraine, Russia, and the European Union) in modernizing Ukraine’s gas transit system, Interfax-Ukraine reported, quoting presidential spokesman, Oleksandr Martynenko.