The third Ukraine Reform Conference will kick off today in Toronto, with Ukrainian President Volodymyr Zelenskiy expected to be in
The third Ukraine Reform Conference will kick off today in Toronto, with Ukrainian President Volodymyr Zelenskiy expected to be in attendance.
Energy is shaping to be a major medium-term concern for Ukraine. Ukraine’s government currently generates some $3 billion in transit fees per year—around 3% of its GDP—from Russian gas suppliers to Europe. That revenue is under threat from the development of the Nord Stream 2 and the TurkStream pipelines. These projects are expected to be fully operational by 2022 and 2021, respectively, and would deprive Kiev of a major revenue source.
At this point there is little Kiev can do to stop the projects from continuing. However, reforms aimed at liberalising and deregulating Ukraine’s energy market could help offset the loss of transit revenues. Reforms that have already been implemented—like the integration of Ukraine’s power grid with Europe’s—will improve market competitiveness and make the country’s energy market more attractive to investors. The planned removal of set electricity prices in 2020 will further improve competitiveness.
Attracting investment could also create lucrative export opportunities. Ukraine holds vast reserves of natural gas that, if properly developed, would allow it to export energy to Europe. Estimates suggest that with these developments Kiev could generate some $1.5 billion per year through natural gas exports by 2030.
Developing an export market would reduce both Ukraine and Europe’s dependence on Russia for energy, so expect energy reforms to garner considerable support during today’s conference.
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