Gas in Ukraine: On another front | The Economist

Gas in Ukraine: On another front | The Economist:



"GAS is flowing again from Russia to Ukraine, but blackouts have hit factories and homes. Ukraine’s prime minister, Arseniy Yatsenyuk, says Ukraine’s independence is compromised by its energy dependence on Russia. Mykhailo Gonchar of the Centre for Global Studies in Kiev claims that in its battle in Ukraine, Russia has opened an energy front where it has big advantages—thanks to Ukraine’s own failings.



Until the 1970s Ukraine powered the Soviet Union. But since independence in 1991, inefficiency and falling production have left it reliant on Russia. The problems are crystallised in Naftogaz, a state-controlled gas giant with a bigger budget deficit than Ukraine. Ukraine has spent $6.4 billion keeping the company afloat this year, much of it going to Russia’s Gazprom.



After Naftogaz was created in 1998, it soon became a fount of corruption. Artificially low prices and patchy metering offer ample pickings. Opaque finances and central control over extraction, transport, storage and sales allow rent-seekers to act with impunity. Yevgeny Bakulin, who led Naftogaz under President Viktor Yanukovych, is under investigation for corruption. Yet he has won a seat in parliament for the Opposition Bloc led by Yuri Boiko, another former Naftogaz official."



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