When Merrill Lynch warns that Ukraine’s government is “underestimating the repercussions of default”, and economic indicators, the saga of the Greek economy vividly reinforces the need to address the situation.
Much like Greece, Ukraine has made a threat to stop making payments to its creditors unless a proposal for a $19 billion writedown of bonds is accepted. Also, exactly like in Greece, the Central bank assured the public that there would be no difficulty for Ukraine’s banks and budget, through the bank Deputy Governor Dmytro Sologub.
Meanwhile, the country’s internal situation is not helped by the further problems with Ukraine’s energy supply. On July 1, Russia’s energy giant Gazprom announced that after the ongoing price dispute, it had ceased supply of natural gas to Ukraine. Gazprom expects “prepayment” if it is to deliver gas to Ukraine, Chief Executive Alexey Miller stated.
Despite the ongoing and historical clash between Gazprom, the Russian government, and Ukraine, the EU’s Southern Gas Corridor could also help relieve Ukraine’s energy reliance on Russia. The network of pipelines will be operating by 2019, confirmed the European Commission’s Vice President in charge of energy, Maros Sefcovic. The Commissioner’s negotiations with Turkmenistan moved forward positively, signaling that Turkmenistan could provide a further break from over-reliance on Russian gas.
For Ukraine, gas prices have long been dictated through the pricing of Gazprom, which has fluctuated according to the political relations of Kyiv with the Kremlin. But before 2010, Dmitry Fritash, co-owner of RosUkrEnergo guaranteed the lowest gas prices in his country’s history by mixing cheaper Turkmen gas and Russian gas. The revolutionary agreement, which would bring gas from Turkmenistan to Europe for the first time, was cast aside when Yulia Tymoshenko’s government signed a direct 10-year deal with Gazprom. While Ukraine’s Prime Minister, Arsniy Yatsenium is seeking $16 billion in damages from Gazprom, this will hardly change history.
With the country unable to afford more wasted opportunities, all eyes are now on the Agency for the Modernisation of Ukraine (AMU), to see how its cooperation with the government evolves as it is half way to putting together a $300 billion fund. The AMU, an initiative in which Fritash is one of the leading figures, has brought together some of the world’s leading experts and politicians from all over Europe to work on a modernization program for the country.
With the focal points being anti-corruption, constitution, economy, EU integration, healthcare, and rule of law, the AMU will undoubtedly serve as a stable partner during a time of economic strife and further clashes internally and with Russia.
6 years after the gas price debacle, Ukraine has once again, the opportunity to look forward and not engage with petty politics that may stifle its progress. Europe, which does not want to be dealing with another economy going Greek, no matter how politically sensitive Ukraine might be, is monitoring the both the government and the AMU closely for developments.