by Tammy Lynch

The ISCIP Analyst
The Institute for the Study of Conflict, Ideology & Policy
Boston University

On 6 January, Ukraine’s former Prime Minister and current opposition leader Yulia Tymoshenko and her allies were able to celebrate an important victory, when the parliament supported a bill to prohibit any reorganization of the ownership of Ukraine’s gas infrastructure.

Earlier, Prime Minister Viktor Yanukovych’s ruling coalition had refused to place the bill on the parliamentary agenda.  But a blockade led by The Yulia Tymoshenko Bloc, coupled with the resulting media attention, forced Speaker Oleksandr Moroz to call the bill for a vote.  Once the measure was placed on the agenda, deputies with an eye on possible upcoming special elections, and faced with massive public opposition to any foreign ownership of the country’s energy infrastructure, had little choice;  all but nine MPs in the hall voted in favor.
Ukraine earlier banned the “privatization” of all gas infrastructure, but this new law goes much further. 
The measure states, “The reorganization (merger, incorporation, separation, spin-off, transformation), concession, renting, leasing, mortgaging, privatization, or other actions to change the ownership of state trunk pipeline enterprises as well as the transfer of shares of such enterprises to the authorized capital of other companies shall be prohibited.''
In addition, "State trunk pipeline enterprises may not be declared bankrupt and liquidated under bankruptcy legislation.”

The law will at least begin to answer one of the opposition’s main concerns – that Ukraine’s state gas company, Naftohaz Ukrainy is being intentionally mismanaged in order to drive it into bankruptcy and create an opening for private ownership.

The law also will put a stop to the apparent proposal of the Yanukovych government to provide Russia part of its gas transportation system in exchange for a stake in Russian gas extraction or a lower gas price.  Although the Yanukovych government is now adamantly denying that it ever would have considered providing any country with part ownership of its most lucrative and strategically important asset, there have been numerous statements in recent days that suggest just the opposite. 
Russian President Vladimir Putin set off the alarm for Ukraine’s opposition during his annual press conference.  “We are talking about merging our assets,” he said.  “Our Ukrainian partners would like not only to form a gas transmission consortium, but also to have the opportunity to enter gas production in the territory of Russia.”  Putin called the idea “revolution,” and said, “There is interest.” 
Following criticism of the idea, Deputy Prime Minister Mykola Azarov then suggested that “nobody will give anybody the ownership of Ukraine’s gas transportation system.” However, there were discussions about “joint management” in order to “receive cheaper gas,” he said.  According to Azarov, “joint management” would decrease the “huge sums” Ukraine spends annually on its pipelines to maintain them.  He failed to explain why Russia would absorb Ukraine’s “huge” expenses in exchange for the right to “manage,” but not “own” the pipelines.
The day after Putin’s comment, a Naftohaz Ukrainy spokesman confirmed, “A political decision has been taken at the top level giving the green light for drafting specific projects by economic entities [Gazprom and Naftohaz] of the two countries, Ukraine and Russia.”
And further, Minister for Fuel and Energy Yuriy Boyko said, “Ukraine has made a series of proposals to Russia, and we have already selected a model that will be further developed and improved.” 
Finally, soon after Putin’s comment, an unidentified “Ukrainian source” told Russia’s Vedomosti that privatization of the gas transportation network was outlawed in Ukraine, but “if its companies are guaranteed access to Russian gas fields, Ukraine may change its mind.” 
Or maybe not.   In fact, the suggestion that assets would be turned over caused the quickest policy about-face thus far for the Yanukovych government.  On the state-owned and increasingly less objective UT-1 television station, journalists portrayed the passage of the opposition’s bill as “a small victory for The Yulia Tymoshenko Bloc,” but “nothing new” since privatization of the pipelines already was banned.  In reality, said the commentator, the ruling coalition simply voted for the bill “for a quiet life” – a reference to Tymoshenko’s loud declarations.   But the attempt to downplay the "victory" clearly suggests that the event caused concern inside the ruling coalition.
Regardless, the passage of the bill should send a strong statement to President Putin and members of the Ukrainian government who apparently expected no response to their statements and proposals.  Ukraine may be struggling to create a consolidated democracy, but its parliament is far from a rubber stamp and its opposition is far from cowed. 


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