How to make energy more transparent

“Transparency” is a big buzzword whenever people talk about improving the business climate in Ukraine.  Everyone agrees that if we can increase transparency in the way economy is run, with a level playing field for all and transparent arrangements for eg tax payments, the business climate will improve.  That in turn will boost Foreign Direct Investment (FDI) and economic growth.  More investment in energy, in turn, will reduce Ukraine’s dependency on imported fuels .

All this makes a recent round table organised by the embassy and partners on the Extractive Industries Transparency Initiative particularly timely.  The energy sector world-wide has a history of difficulties with transparency: so much so that some people talk of the “natural resources curse” whereby countries with a wealth of natural resources tend to suffer from a poor distribution of those resources and even poverty.  That was why the UK was a driving force behind the establishment of the EITI, based on the principle of “publish what you pay”.

The basic idea of the EITI is that energy companies publish what they are paying to governments in the form of royalties and taxes; and that governments, for their part, also publish what they are receiving from energy companies.  In this way, it becomes easier to identify whether money is going missing somewhere.  At the round table, experts note that this principle could be valuable in Ukraine, and could additionally be extended to gas transit.  All the information is in theory available already: but the EITI puts it together clearly in the public domain, reassuring potential investors – and the public – that nothing underhand is going on.

The “DiXi Group” NGO recently launched a web-site dedicated to monitoring Ukraine’s progress on the EITI.  The Ukrainian Government has recognised the importance of Ukraine becoming an EITI candidate – the first serious stage towards full membership – and the World Bank, EBRD and IMF all support Ukrainian participation.   In November last year, Prime Minister Azarov promised in a letter to the IMF that Ukriane would take ” further steps towards accession to EITI in the next few months”.  In December, Guenter Oettinger, EU Commissioner on Energy Issues and Yuri Boiko, Ukrainian Minister of Energy and the Coal Industry, acknowledged that it was vital for Ukraine to acquire EITI candidate status.  So far, however, there is little evidence of a Ukrainian government work plan for implementing the EITI.  Without this, Ukraine may not receive candidate status; and Ukraine’s attractiveness to FDI will be diminished.

All this would make it an “easy win” for the Ukrainian Government to re-affirm its commitment to EITI principles; to announce its candidate status; and to launch the process towards compliance.  One good opportunity to do this would be at the EITI Global Conference in Paris on 1-3 March; or, if not, as soon as possible thereafter.

You can read a full article about the seminar in the Ukrainian newspaper “Zerkalo Nedeli” (in Ukrainian).