The latest confrontation between Russia and Ukraine over natural gas, and the dispute's immediate impact on Eastern Europe's energy supply, illustrated how energy conflicts in one region can extend over pipelines and supply chains to countries thousands of miles away. In this highly politicized dispute, resources and the energy transit infrastructure became tools for economic and political intimidation.
Transparency in energy transport planning and pricing can help avoid monopolies, build public trust in government and foster stability, but this can only happen if accountable systems of revenue management are enforced, including in transit states such as Ukraine. Long-term transit stability is contingent on the social and economic development of countries hosting the transit pipelines. But Russia and its less transparent intermediaries still remain hugely influential in the post-Soviet states, and many of these nations are willing to trade transparent practices and other aspects of their new sovereignty in exchange for energy security from Moscow.
During the Ukraine crisis in January, several newer members of the EU-27 went directly to Moscow for help, exposing the European Union’s inability to broker and enforce a multilateral deal. This reality further undermined the EU’s image as a unifying and responsive entity, even as its member states suffered the fallout of international discord.
Though Russia and Ukraine came to an agreement after German intervention, questions remain concerning the political concessions made by all three players. As the deal stands, Russia will provide a discount to Ukraine on European prices for oil; Ukraine will maintain a favorable transit tariff for Russia’s pipeline; and there is speculation that the opaque intermediary RosUkrEnergo may be taken out of the equation.
Many policy challenges are yet to be addressed, including finding mechanisms to ensure transparency in intergovernmental tariff negotiations, creating new international gas pricing methods, and setting a regulatory framework that includes corporate ownership disclosure.
To learn more about the urgent need for transparency in the transportation of hydrocarbon resources, please see a new policy brief written by Revenue Watch partners from Azerbaijan, Georgia, Kazakhstan and Ukraine. The report, Expanding EITI Agenda to Include Energy Transit Revenues, explains the need for a broadened EITI framework that includes transit issues.
The transport of oil and gas across great distances and international borders is a link in the chain of revenue transparency that is often overlooked. The report offers a rationale for the expansion of the EITI to include transit and transportation disclosures, and emphasizes the important socio-economic impacts of the transit sector on its host countries.
Read more and download the entire report…
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