Ukraine's Opposition Protests Shale Gas
The failed Viktor Yushchenko presidency should warn us about the danger of continuing to use labels such as ''pro-Western'' and ''pro-Russian'' in Ukrainian politics. President Yushchenko had the full backing of the Bush administration to move to NATO membership but he believed that fighting his erstwhile ally Yulia Tymoshenko to be more important.
We need to be also cautious about labelling authoritarian President Viktor Yanukovych who, although accused by domestic and international critics of rolling back democracy in Ukraine, has not been keen on joining the Russian-led Customs Union. The Yanukovych administration is also the first to seriously begin the process of seeking Ukraine's energy independence from Russia in which US energy companies are playing a strategic role.
Shale gas has an important place in Ukraine's goal of seeking energy independence. It is therefore one of the idiosyncrasies of Ukrainian politics that the normally pro-Russian and pro-Yanukovych Communist Party of Ukraine (KPU) and two out of three opposition parties (Svoboda [Freedom] and Batkivshchina [Fatherland]) are opposing the production of shale gas. Prime Minister Azarov said to U.S. Under Secretary of State Wendy Sherman in Kyiv on March 19, ''Let them explain to you whose interests they protect. On the one hand, they say they are against Russia, on the other hand, in fact, they are the agents of the Russian Federation.''
The fiercely anti-communist opposition and KPU are unusual bed partners and therefore their common stance against shale gas production looks at first unusual. International boxing champion Vitaly Klychko's Ukrainian Democratic Alliance for Reforms (UDAR) has not supported the anti-shale gas protests. UDAR parliamentary deputy Rostyslav Pawlenko, deputy head of the party's executive committee, said, ''Shale gas is a vital element of Ukrainian energy and, hence, economic security. That is why UDAR supports its excavation in Ukraine. Of course, provided that all the environmental standards are met, and dialogue with local communities is held; that is,in the same manner as how Western energy companies have behaved in the US and the EU.''
Ukraine reportedly has the third largest reserves of shale gas in Europe. In May 2012, Shell and Chevron won tenders for the development of shale gas at the Yuzovka and Olesko fields respectfully. In August 2012, ExxonMobil (main operator), Shell, OMV Petron (Romania) and state-owned NadraUkrainy won the tender for production of shale gas on the Skifska oil and gas field on the Black Sea shelf. Shell and ExxonMobil are exploring the development of shale gas reserves in the Lviv and Donetsk basins.
Shale gas production would reduce the opaque profits long received by what has been termed the ''gas lobby'' in Ukraine who have always - surprising to many - been dominated by Western Ukrainians. In the 1960s and 1970s, Ukraine was the biggest gas producer in the Soviet Union and much of this infra-structure of pipelines, underground storage and expertise remains in Western Ukraine. The best Soviet University on oil and gas was in the Galician city of Ivano-Frankivsk. Gas tycoon Dmytro Firtash was born in the village of Synkiv in Ternopiloblast and grew up in Chernivtsi and is the only Western Ukrainian oligarch. His mother Maria Firtash has three businesses registered in his home village. Firtash broke into the gas business in the late 1990s with a ''food for gas'' barter scheme between Ukraine and Turkmenistan.
Other Western Ukrainians in the ''gas lobby'' include Ihor Bakay, who is well known for saying that most Ukrainian oligarchs made their initial capital from the re-sale of Russian energy in the 1990s, and financial supported the 2000-2001 parliamentary coalition behind the Yushchenko government. In December 2004, Bakay fled to Moscow just ahead of being accused of stealing $1 million in state funds from a state institution which he had headed in 2003-2004.
Oleksiy Ivchenko, leader of the emigre Organisation of Ukrainian Nationalists (Stepan Bandera wing)-backed Congress of Ukrainian Nationalists (KUN) until recently, was based in Turkmenistan in the 1990s where he worked with Bakay and they together introduced Firtash to the gas business. KUN is humorously described as the Committee to manage Naftohaz. NaftohazUkrayiny has been headed by Western Ukrainian members of Our Ukraine Ihor Vasyunyk (brother of former Deputy Prime Minister Ivan Vasyunyk) and KUN leaders Ivchenko and Andriy Lopushanskyy. A monument to nationalist leader Bandera was unveiled by NaftohazUkrayiny First Deputy Chairperson and KUN candidate Lopushanskyy in his election district to boost his popularity in the 2012 elections.
In Ukraine's virtual political world it is not incompatible to be both a follower of the anti-Russian nationalist leader Bandera and at the same time pursue energy policies that closely bind Ukraine to Russia. In 2005-2006, Ivchenko headed NaftohazUkrayiny and KUN was a member of Yushchenko's Our Ukraine bloc in the 2002 and 2006 elections. Firtash donated millions of dollars to the Lviv-based Ukrainian Catholic University, that has received Ukrainian diaspora support, and the Ukrainian Catholic hierarchy attended the opening of greenhouses in his home village last fall.
Ukraine's ''gas lobby,'' which dominated the first Nikolai Azarov government, is no longer as powerful today having failed to secure a revision of the high gas price Ukraine pays with the 2009 gas contract. Although Serhiy Levochkin remains head of the presidential administration, the current Azarov government demoted Yuriy Boyko and Konstyantin Hryshchenko while Valeriy Khoroshkovsky was forced to sell his Inter television channel and flee into exile.
Ukraine's ''gas lobby,'' although dominated by Western Ukrainians who are traditionally anti-Russian, do not seek energy independence from Russia because this would end their source of massive corrupt rents. Using environmental concerns is a fig leaf for the ''gas lobby'' to de-rail any drive to reduce Ukraine's energy ties to Russia. The 1986 Chornobyl nuclear accident led to the emergence of the popular ZelenyiSvit (Green World) civic movement but Ukraine's green movement was hijacked by oligarchic interests in the 1998 elections and since then there has not been a genuine environmental lobby.
Ukrainy through OstChem which has replaced the opaque RosUkrEnergo (RUE) gas intermediary removed by the 2009 gas contract. OstChem Gas Trading company will import 8.1 billion cubic metres of gas this year, up from 6 last year when it paid $280 per thousand cubic metres, which is far less than the 430 paid by Naftohaz
Shale gas will play a strategic role in permitting Ukraine to conduct an independent foreign policy by making the country energy independent from Russia. Svoboda and Batkivshchina should move away from the virtual doublespeak of saying they support Ukraine's energy independence while blocking shale gas. They could start by following Klychko's example of putting the country's national interests before that of scoring election points with Yanukovych and the Party of Regions.
Our thanks to US Ukraine Observer