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Ukraine makes strides in extractives sector oversight

Following its second Validation, Ukraine has made meaningful progress in implementing the EITI Standard, with considerable improvements. The country has used the EITI to strengthen extractive sector governance and mitigate corruption risks.

The extractive sector plays an important role in Ukraine’s economy, amounting to 5.59% of GDP and 10.62% of government revenue in 2019. Since joining the EITI in 2013, Ukraine EITI has played an instrumental role enabling greater extractive sector oversight. In 2018, Ukraine’s government adopted new legislation requiring extractive companies to disclose key information, such as project-level payments and “material” elements of contracts relating to the extractive industry.

“I commend the Government of Ukraine and all EITI stakeholders for their efforts to align EITI implementation with broader national reform priorities such as anti-corruption, improvement of the investment climate and strengthening of extractive sector governance,” said Helen Clark, EITI Board Chair. “On behalf of the EITI Board, I also welcome Ukraine’s efforts to make a transition to systematic disclosure of information and I encourage the country to continue working on ensuring the transparency and accountability of its oil, gas and mining sectors.”

Transitioning to systematic disclosure

Ukraine has made significant progress in making extractive data available and accessible to citizens. The country’s license allocation processes and subsoil agreements have become more transparent through digitisation. In 2018, Ukraine began piloting electronic auctions for granting subsoil licenses, and in 2020 the system was instituted on a permanent basis. All subsoil licenses issued from 2016 onward are publicly available on the State Service of Geology website. The government is also taking steps to disclose all agreements that are granted, entered into force or amended from 1 January 2021 onwards.

In addition, Ukraine EITI has been piloting electronic data collection through an open data portal hosted by the Ministry of Energy. The portal aims to simplify the process of collecting information from extractives companies, so as to improve data timeliness and accessibility.

Ukraine has also made satisfactory progress in disclosing information on the individuals who own and control extractive companies. In 2015, Ukraine became one of the first EITI countries to establish a publicly accessible beneficial ownership register, in line with the country’s broader anti-corruption agenda. The government continues to strengthen its data verification procedures to ensure that ownership information is accurate and comprehensive.

Strengthening trust at the regional level

In line with the country’s decentralisation efforts, Ukraine is using the EITI as a platform for informing communities about the impacts and economic benefits of the sector. This has been achieved by through dissemination and outreach activities with community representatives, industry and local governments to further citizens’ understanding of decentralisation of rental payments. EITI reporting also includes revenue streams that are particularly relevant for extractive areas, such as environmental payments.

Monitoring impact

To strengthen EITI implementation and support the country’s transparency reform agenda, Ukraine EITI produced a monitoring and evaluation framework in August 2020. Developed with support from international partners, the framework sets out recommendations and indicators to better assess the EITI’s impact on national reforms, broken down in four categories: EITI governance and administration, development of a dialogue platform for strategic ideas and proposals, expansion of the EITI and EITI-related activities, and strengthening partnerships between local governments, companies and civil society.

Looking ahead

While Ukraine has made some progress in disclosing information related to state participation and transportation, there are opportunities to strengthen transparency in these areas. Further disclosures on state-owned enterprises (SOEs) can enhance efficiency of how these companies are managed and can support reforms aimed at ensuring macroeconomic stability. There is also an opportunity to provide more detailed information on revenues obtained from the transportation of extractive resources, to strengthen oversight and accountability of transportation arrangements. Additionally, the EITI Board recognises the need for more comprehensive disclosures on production and reserves. These efforts could be integrated into broader open data and energy sector reforms.