Kuchma dismisses top energy official; opponents allege Russian influence (12/14/03)

Kuchma dismisses top energy official; opponents allege Russian influence

by Roman Woronowycz
Kyiv Press Bureau

KYIV - President Leonid Kuchma dismissed Ukraine's top government official in the energy sector on December 5 - less than a day after a visit by Russia's influential energy czar Anatolii Chubais. Some politicians have tied the firing to the visit.

While opponents of the government said that Vice Prime Minister Viktor Haiduk got the boot, along with Energy Minister Serhii Yermilov, a close associate, who was fired on December 9, because he had not toed the political line expected of him, Prime Minister Viktor Yanukovych called the dismissal a result of Mr. Haiduk's inability to achieve results in clearing up major issues that have throttled development of the sector.

"The fuel and energy complex in the country has accumulated many problems, which were not being solved as quickly and as consistently as needed," noted Mr. Yanukovych on December 6 through his spokesman, Taras Avrakhov.

Mr. Haiduk's portfolio included responsibility for overseeing the development of the Odesa-Brody oil pipeline, which remains bereft of crude; the organization of Ukraine's participation of a natural gas consortium with Russia and Germany, a deal that has not yet been signed; and oversight of Ukraine's electricity grid.

Some political pundits say Mr. Haiduk was dismissed after Mr. Chubais met President Kuchma in Kyiv on December 4 and convinced Ukraine's state leader to allow the Russian state-owned firm he heads, Unified Energy Systems, to purchase a stake in 10 Ukrainian regional electrical suppliers. Mr. Chubais also signed an accord giving UES the right to purchase Ukrainian electricity for use in Russia.

National Deputy Oleksander Hudyma, head of the parliamentary subcommittee on the natural gas industry, said on December 8 that Mr. Haiduk's dismissal was specifically a result of his lack of support for the UES initiative, which effectively would give Russia ownership of a large part of Ukraine's electrical grid.

"The discussions that occurred with Chubais, that's the real reason for the firing of Haiduk," explained Mr. Hudyma. "His position and that of Energy Minister Yermilov not to allow Chubais into Ukraine's electrical energy market caused the Russian financial-industrial group led by [Russian President Vladimir] Putin and Chubais to demand the firing."

But Mr. Haiduk had also opposed Russian policy toward the Odesa-Brody pipeline and the development of a natural gas consortium with Russia. Other politicians laid the blame for his dismissal on these positions.

National Deputy Yulia Tymoshenko said that, in addition to these matters, Mr. Haiduk also had insisted that President Kuchma veto several amendments to the law on the energy sector that some lawmakers had gotten through the Parliament for their own financial benefit, inasmuch as the changes would allow for some financial operations in the industry to return to the shadows.

Mr. Haiduk criticized the gas consortium initiative during a press conference on December 5, held hours before he was fired. He stated that he saw no benefit that the consortium could give Ukraine, a conclusion he said he had drawn based on reports by independent consultants. Those analyses, he said, showed that giving a concession to Russia in the gas transport system was inexpedient because the cost of the value and the necessity for Ukraine to do so was not clear.

"The question of a consortium to manage the existing gas transport system in Ukraine has been removed from the agenda," announced Mr. Haiduk and then added, "Can't we deal with the management? Is the gas transport system in such bad shape?"

The statement was followed within hours by a whole slew of reaffirmations by representatives from both countries that negotiations on the development of the consortium were not dead in the water, as Mr. Haiduk had proposed, but were in fact continuing.

In Symferopol, Prime Minister Yanukovych rejected Mr. Haiduk's assertion as "simply the opinion of experts," reported Interfax-Ukraine. In Russia, Serhii Kuprianov, chief executive officer of the Russian natural gas giant Gazprom, said the firm had received no official word of Ukraine's withdrawal from negotiations. The corrections and reaffirmations continued into the weekend. On December 7, Russian Ambassador to Ukraine Viktor Chernomyrdin noted that not only was a deal still in the works, but that "preparations are almost finished."

The way in which Russia had pushed to utilize the Odesa-Brody oil pipeline also had not sat well with Mr. Haiduk. He had come out in support of continuing to have crude oil flow through the Odesa-Brody pipeline in the manner originally intended - from the Caspian Sea to Poland - and not in reverse fashion, as Russia's TNK-BP oil company wanted.

Mr. Haiduk noted during his final press conference as vice prime minister that contrary to claims that Ukraine could not find a multinational company willing to commit to moving Caspian crude to Europe through the Odesa-Brody pipeline, Chevron, in a joint venture with the government of Kazakstan, had expressed such a desire.

The vice prime minister for energy explained that Chevron had confirmed to him that it was ready to commit to moving oil from the Caspian region to its refineries in Germany. He said the multinational company had also told him it was ready to reverse its own oil pipeline, which currently runs from Ingolstadt, Germany, to the Czech towns of Kralupy and finally Litvinov in order to connect with the Druzhba pipeline and the Odesa-Brody transport structure.

Chargé d'Affaires Yergali Buligenov of Kazakstan's Embassy in Ukraine told The Weekly on December 9 that in fact such a decision was made during a meeting in Kyiv on July 17. Kazakstan has a 20 percent stake in the Caspian Sea joint venture with Chevron.

Mr. Buligenov also noted that at the same meeting Kazakstan had expressed its willingness to finance the completion of the Brody-Plotsk portion of the pipeline should economic and technical underpinnings show such a project to be feasible. Poland and Ukraine have said the only matter holding back the beginning of construction, which Warsaw supports in principle, is funding.

Mr. Buligenov told The Weekly Kazakstan never received a response to its July proposal. "We never received any documents showing either the technical or the economic requirements to do the project," explained Mr. Buligenov.

On December 10, President Kuchma appointed Andrii Kliuyev to replace Mr. Haiduk. Mr. Kliuyev was a lawmaker in the Verkhovna Rada, where he chaired the Committee on Fuel and Energy.

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