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Hybrid high voltage. Ukrainian oligarchs powered by Russia

UcrainaMoguli
©EPA-EFE/STEPAN FRANKO  |   People look on cutouts depicting Ukrainian presidential candidates, Russian President Vladimir Putin (L) and Ukrainian businessman Ihor Kolomoyskyi (С) during a performance of activists, in Kiev, Ukraine, 28 March 2019.

The world is actively looking for opportunities to use hybrid engines to protect the environment.  However, in the Ukrainian version, the problem with electricity has primarily a political focus. Energy relations with Russia and Belarus confirm this.

Power imports from the enemy

The heating season in Ukraine ends with certain paradoxes. If as far as natural gas reserves are concerned, Ukraine’s Naftogaz has reported a record 16.2 billion cubic meters in its underground storage facilities, in the area of electricity supply the situation is much more complicated. Ukraine has a significant capacity to produce thermal and nuclear energy, but that did not eliminate the risk of blackouts during the winter of 2020/2021.

Ukrainian homes did not experience problems with the electricity supply, but experts have pointed to the imports of electricity from Belarus (since January 2021) and Russia (since February 2021). Those imports are a political issue, as Russia skillfully uses energy weapons in international relations. If its gas component today is centered around the completion of the Nord Stream 2 gas pipeline, electricity has become a hybrid tool for the first time in several years.

On January 3, Ukraine began importing electricity from Belarus, which is produced by the new Belarusian nuclear power plant in Astravets. The plant was built by the Russian state-owned Rosatom group, and it was paid for with money borrowed from Moscow. Furthermore, the plant now allows Alexander Lukashenko to raise the issue of financial assistance to Belarus in talks with Vladimir Putin. For example in February, independent media writes about new Russian credit to Lukashenko – $3 bln.

The plant was highly controversial and is considered a threat to its national security by EU and NATO member Lithuania. Thanks to Ukrainian customers, the Belarusian nuclear power plant has started operating at full capacity, although most neighboring countries have refused to buy the electricity it produces. It should be noted that the ceremonial launch of the nuclear power plant took place in November 2020 with the participation of Lukashenko, whose image was seriously tarnished at that time following the rigging of the presidential election and the government’s handling of the protests that followed the elections; sanctions against the Lukashenko regime were not only discussed but also implemented.

However, this was not enough to overcome the crisis on the electricity market, and in February 2021, Russia began selling electricity to Ukraine. The volume of Russian electricity imports was small, but the fact itself seems significant because, in the fall of 2015, the government of Arseniy Yatsenyuk refused to buy electricity in Russia. For five years, Ukraine did not buy electricity from the aggressor state, using its own resources, but in 2021 it gave in to pressure from oligarchic structures.

The “patriotic” oligarchs that want to reconcile with Russia

The main importers of electricity from Belarus and Russia were the commercial structures of Ihor Kolomoiskyi and Viktor Pinchuk. Both have industries that require significant energy costs. Ihor Kolomoiskyi was a business partner of Zelensky before presidency. He also owned TV Chanel 1+1, which was the base for numerous shows produced by Zelensky productions. The oligarch also took active part in Zelensky’s election in 2019 by financing the campaign and supporting the candidate in his media. After Zekensky won, Ihor Kolomoiskyi's structures started to manage Ukraine's largest thermal energy producer, Centrenergo, which ultimately led to a significant reduction in coal reserves and a difficult financial situation. After Zelensky won the presidential election, Kolomoiskyi himself called for finding ways to reconcile with Russia. I will note that the United States recently imposed sanctions against Igor Kolomoiskyi "for involvement in large-scale corruption" in 2014-2015. Then he governed the Dnipropetrovsk region and tried to present himself as the most patriotic oligarch of Ukraine.

Victor Pinchuk wrote about "painful compromises" in an op-ed published in The Wall Street Journal in December 2016, speaking in favor of abandoning the desire to become a member of NATO and the EU. Pinchuk is often called the most pro-Western Ukrainian oligarch, but we should not forget that Russia is one of the key markets for his companies. Both oligarchs, although competing with each other in business, have powerful media empires capable of influencing public consciousness. If Volodymyr Zelensky is called Kolomoiskyi's longtime business partner, Pinchuk's influence on the President of Ukraine is now carried out through several channels, and the television empire has created a "warm bath" for Zelensky.

The problem concerns not only trade with the aggressor state and the neighboring country, on which Ukraine has expressed readiness to impose sanctions. By importing electricity from Russia and Belarus, Ukrainian oligarchs Kolomoiskyi and Pinchuk formally become an instrument of the Kremlin, as their economic interests are focused on Russia. By importing electricity, they are harming the interests of the state in search of their profits, destroying its energy sector.

The energy imports are a threat for Ukraine’s national interest

It is necessary to pay attention to the fact that Rosatom acts as an agent to promote Russia's interests. Not only economic ones. Each nuclear power plant is a powerful infrastructure facility worth several billion dollars or euros, and their construction in Hungary, Turkey, and Bulgaria is accompanied by a powerful information campaign about the "greatness of Russia." In the case of Belarus, the construction of its nuclear power plant looks like an argument in favor of rapprochement with Russia within the Union State.

There is also a foreign policy aspect in this situation. The Belarusian nuclear power plant is located 50 kilometers from the capital of Lithuania - Vilnius. The leadership of the Baltic republic protested against the construction of the nuclear power plant in all possible ways but failed to convince Lukashenko of the inexpediency of the project. In March 2021, Lithuanian President Gitanas Nauseda called on Ukraine not to buy electricity in Belarus from the rostrum of the Verkhovna Rada. This call looks significant, as Lithuania has consistently supported Ukraine in the international arena and has the right to count on similar actions.

Lithuania is rightly considered to be a true friend of Ukraine, but not all EU states want to maintain a sanctions regime against Russia.  Let me remind you that it is reviewed every six months. So it should come as no surprise that in June the European Council will not only discuss a change in its strategy towards Russia but will also be able to ease sanctions against it. Such a request has been made in some countries of Old Europe for a long time.

After the address of his Lithuanian colleague, Volodymyr Zelensky instructed the government to consider a draft decision banning the import of electricity. But it is impossible to count on the efficiency of decision-making. Let me remind you that the bill on banning the import of electricity from Belarus and Russia was registered by parliamentarian Oleksiy Kucherenko in December 2020, but his membership in Yulia Tymoshenko’s opposition Batkivshchyna parliamentary group does not allow him to count on a turbo regime in this regard. Acting Energy Minister Yuriy Vitrenko believes it is possible to disconnect Ukraine from the joint energy system with Russia, Belarus, and Moldova in 2023 and integrate to ENTSO-E – European energy system with common European electricity market. Nevertheless until then the situation may change many times.

What conclusions can be drawn? First, the oligarchs' influence on the Ukrainian economy and politics remains strong, and this markedly contradicts President Zelensky's promises to carry out real deoligarchization.  Secondly, the way this strategic sector of Ukraine’s economy is being handled demonstrates the lack of a strategic vision of the situation. Third, Ukraine with its own hands provides grounds to ease sanctions pressure on Russia, effectively weakening its position in the confrontation with the Kremlin. These mistakes could prove to be costly.

Propaganda de Razboi - Razboi in UCRAINA
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Updated at: 08 Apr 2021 12:12:47
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5 minutes read
  • The world is actively looking for opportunities to use hybrid engines to protect the environment. However, in the Ukrainian version, the problem with electricity has primarily a political focus. Energy relations with Russia and Belarus confirm this.
  • The main importers of electricity from Belarus and Russia were the commercial structures of Ihor Kolomoiskyi and Viktor Pinchuk. Both have industries that require significant energy costs. Both oligarchs, although competing with each other in business, have powerful media empires capable of influencing public consciousness. If Volodymyr Zelensky is called Kolomoiskyi's longtime business partner, Pinchuk's influence on the President of Ukraine is now carried out through several channels, and the television empire has created a "warm bath" for Zelensky.
  • Acting Energy Minister Yuriy Vitrenko believes it is possible to disconnect Ukraine from the joint energy system with Russia, Belarus, and Moldova in 2023 and integrate to ENTSO-E – European energy system with common European electricity market. Nevertheless until then the situation may change many times.
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