Ukraine – concrete reforms, in the shape of the EITI

Reality check

“Are you satisfied?” My colleague Richard and I asked an official from the Ministry of Energy as we left our meeting with the 36 year old Chairman Andriy Kobylev of the state behemoth Naftogaz. “No”, he replied, “my son is a soldier and he has two small children.” Our question had simply been intended to be about the outcome of our meeting. Now we were given a reality check sending shivers down our spines.
Such is life in Kyiv. Ukraine is an invaded country at war, with lots of friends speaking in their support but doing little to assist. Life in Kyiv appears at the same time strangely normal. Meetings take place and conferences are held. How do you give speeches about good governance when soldiers are dying and the country is increasingly occupied?

Much in Ukraine remains about energy. The country is still a transport corridor for Russian gas to Europe. The country is still a significant gas and coal producer. The country’s industry is still hugely energy inefficient and hugely energy-intensive. The population of over 40 million rely on subsidized gas. Corruption, mismanagement and inefficiency is everywhere. The influence of oligarchs affects just about everything. The revolution has not changed this, yet.

The economy is in free fall and reforms and rebuilding is acutely needed. Reformers are in place, but they must not only fight Russian interests, but also economic and political powers at home that have a lot to lose from progressive reforms. Energy corruption and crisis is of course not a new challenge for Ukraine, but part of the root causes to its formidable challenges.
Do you focus all on crisis and war, or do you acknowledge that unless you give priority also to longer term reforms, the crisis will never end? Fortunately Richard and I met many Ukrainians during the last couple of days who in their nation-building efforts are taking the long view.

Ukraine became member of the EITI before the revolution. The EITI table is largely laid in Ukraine. There is a well-functioning national EITI commission, a draft outline (so-called reporting template) and plan for how to produce an EITI Report. The World Bank is about to provide the financial support required. The country has until October this year to produce its first EITI Report. This report should matter more than most. It could bring some basic transparency, explain how the sector is governed and lay out some further reforms. Reliable figures about the money flowing to and from the companies that produce in Ukraine and that transport Russian gas to Europe are critically important questions in Ukraine. Let’s not kid ourselves, this information is unlikely to put an end overnight to the robbery of the nation’s resources that has been going on for so long. That is rarely how transparency and openness work. Vested interests need to be fought back, inch by inch, reform by reform. Transparency is important. In Ukraine its main value is likely to be that it sharpens its population’s and new leadership’s attention on where, what and who is wrong in the system.

“What happens the day after the report is published?” a corporate executive asked from the floor at a conference today. “You can bring about revolution pretty much overnight, reforms and nation-building take longer”, I stuttered. 

Strong backing all around

Energy and Coal Industry Minister Volodymyr Demchyshen took plenty of time to consider how the EITI process could be hurried up, on a day Gazprom once again threatened to cut off the gas supply. Under Vice Minister Igor Didenko the EITI national commission appeared to make good progress with finalizing what should be included in the EITI Report. Deputy Head of the Parliamentary Energy Committee Dombrovskyy gave the draft law that would give the EITI the backing of the Rada, the parliament, his strong support. And as for the chair of Naftogaz Kobylev and his chief operating officer, Richard and I could not have met two persons more interested in wanting to find out what was required by them and responded “sure, we will deliver, including making sure that the subsidiaries report what is required”. Thus, strong EITI backing all around. Let us hope that the system can deliver.

In many countries the EITI provides a fora where trust can be built between government, civic society and company representatives. This aspect is not hugely relevant in Ukraine, for now. It is reformers against those corruptly gaining from the system, across sectors. One company representative told us: “I have always thought it important for Ukraine to implement the EITI. In these volatile times, I consider it essential.” The EITI would not be standing in Ukraine had it not been for what Olena at Dixi Group has done over the years, the Renaissance Foundation and Publish What You Pay. 

As we headed to the airport we overtook a long column of military vehicles. “Are they on the way to the front?” we asked our driver. “Of course”, he replied.

On our way to the airport, the troops to the front.

Kiev airport, 25 February and where the internet is free and faster than any Western European airport we have experienced,

Jonas and Richard

To learn more about the EITI in the Ukraine, visit their homepage eiti.org.ua or the country page on eiti.org.