EITI in Ukraine:long way to candidate status

Roman Nitsovych, DiXi Group

Oliana Valigura, Q-Club

Why EITI matters to Ukraine?

Strengthening of energy security

More ‘comprehensive’ policy of Ukraine for the advanced countries (EU, U.S.)

Reducing level and impact of corruption

Creating trust for foreign investors

Increasing sovereign credit rating, reducing risks

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Why Ukraine matters to the EITI?

Better investment climate for EITI-supporting companies (such as Chevron, ExxonMobil, GdF, Shell etc.)

More transparent energy market integrated with the EU (important for such supporting countries as Germany, France, Italy, UK, and the U.S.)

A pioneer in the Black Sea region (can involve in the process other countries of the region)

A lab for testing new EITI-covered areas (transit of hydrocarbons)

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EITI process: early beginnings

Analytical report “Oil and Gas Sector of Ukraine: transparency of functioning and revenues” (NOMOS)

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2008:

(March) International conference on modernization of the gas transportation system – Ukraine obliged to ensure transparency in the energy sector

(July) Letter of Ukrainian NGOs to the government on joining the EITI, mentioning the IFIs and the EU position

(May-Dec) Creation of the “EnergoTransparency” Association (NOMOS, DiXi Group, Q-Club, Institute of Sustainable Development and others)

(Sept) Resolution and Statement of the Cabinet of Ministers of Ukraine on joining the EITI

2009:

EITI process: pressure increases

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Initiatives to expand EITI scope on transportation of hydrocarbon resources (CSOs)

Report on energy transparency in Ukraine, study on Ukrainian legislation changes to bring it closer to EITI requirements (NOMOS)

(July) Ministry of Fuel and Energy confirmed its intension to continue EITI implementation

(Oct) Website launched on the EITI implementation in Ukraine and abroad (DiXi Group)

(Nov) Memorandum with the IMF under the new stand-by program: “further steps to join the EITI” promised

(Dec) 5th Joint Report on the implementation of the EU-Ukraine MoU in the energy sector

2010:

EITI process: more commitments taken

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(Jan) Public parliamentary hearings on the reforms in upstream sector (NOMOS)

(Feb) Ukrainian journalists and experts visited the EITI International Secretariat (Q-Club)

(Feb) Round table "Prospects of Ukraine's accession to the EITI“ (DiXi Group, Shell, ACC)

(Feb) Ukraine joined the Energy Community, obliging to implement acquis communautaire in energy

(Mar) Open discussion “Oil – current situation review and expert forecasts” (Q-Club)

(Apr) The President signed an Order to accelerate the process of Ukraine joining the Initiative

(Aug) The Cabinet of Ministers adopted the Resolution on establishment of the working group for EITI implementation

(Sept) Ukraine joined the Open Government Partnership, aiming compliance with the EITI accession criteria by December 2012

2011:

EITI process: a breakthrough?

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(Feb) Forum of the “EnergoTransparency” Association: joint position on key issues defined

(March) 6th Joint Report on the implementation of the EU-Ukraine MoU in the energy sector

(March) The Cabinet of Ministers adopted the Resolution on changing the Authorized for the EITI implementation; first meeting of the governmental Working Group

(March) Pilot edition of the Energy Sector Transparency Index (DiXi Group), study on hydrocarbon transit transparency (Revenue Watch Institute), study on Ukrainian coal sector transparency (Institute for Sustainable Development)

(April) Summit of the Open Government Partnership: Ukraine confirmed its willingness to implement EITI in the OGP action plan

(Feb-May, June→) Project on information and analytical support of the government (DiXi Group)

(July) “EnergoTransparency” Association addressed the government to include EITI commitments in the update of the Energy Strategy by 2030

(Sept) Nomination of representatives in the MSG from each of the constituencies

2012:

EITI process: a breakthrough?

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(11 Oct) International conference “Ukraine on the way to join EITI” (Ministry of Energy, World Bank) + 1st MSG meeting

• Legal status defined (Order of the Ministry of Energy)

• General issues discussed (EITI requirements, principles of MSG functioning)

• Training for MSG members by the EITI International Secretariat

(30 Oct) 2nd MSG meeting• Drafts of the MSG Principles of Association and Terms of Reference

considered

• Scope of EITI in Ukraine defined

• Principles of the national work plan discussed

• Issues of creating the MSG Secretariat and its financing raised

(13 Nov) 3rd MSG meeting (to be held)

2012:

Stakeholder positions — Govt

The Ministry of Energy and Coal Industry as the main authorized body

Position of the IMF and World Bank crucial as they contributed to speed up the process

Close cooperation of the govt representatives with civil society and international community contributed to better understanding and knowledge transfer

Slow, yet stable decision-making in terms of bureaucracy (drafts of all relevant documents to be coordinated and agreed among 13 agencies)

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Stakeholder positions — CSOs

Most active and manageable part of the MSG, united into a single network

Improved awareness: number of analytical studies, press releases, policy briefs produced; assisting the govt with the draft documents needed

Organizing and holding events to promote comprehensive transparency in extractive sector (incl. hydrocarbon transit and coal)

Website on the EITI in Ukraine as both online-media and database, monitoring of all relevant activities (progress reports)

Good international engagement: participation in the EITI Global Conferences, visit to EITI Secretariat, trainings of the Eurasia Extractive Industries Knowledge Hub, meetings of the Eurasia Transparency Network

Capacity-building as well as involving more CSOs needed

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Stakeholder positions — business

Most of the companies were involved in the MSG during the latest phase (nomination of representatives)

Multinational majors (Shell, Chevron) engaged earlier strongly supporting EITI, as it corresponds to their CSR practices

Ukrainian state-owned companies cautious, following position of the government

International accounting standards still could be a problem for small companies

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Stakeholder positions — donors

EITI Multi-Donor Trust Fund — not applicable

EITI International Secretariat — supports Ukraine as a prospective candidate country through dialogue and consultations

IMF, World Bank — expect Ukraine will comply with obligations and/or commitments taken; mostly monitoring activities, very limited direct assistance

EU Delegation, Embassies of the U.S. and Norway — raise the issue of transparency, advocate for better business climate and good governance in the sector

International Renaissance Foundation — promotes good governance in the energy sector, the only institution to support CSOs on systematic basis

Revenue Watch Institute — supports networking activities and trainings in wider Eurasia region, activity in Ukraine quite limited

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Risks to be adressed

Govt• Formalistic approach to implementation• Lack of cooperation with other stakeholders• Lack of state financing needed

CSOs• Still low capacity to execute control over

implementation• Distancing from both grassroots and GONGOs• Dependent on donors, low sustainability

Business• Low general awareness• Transparency not a main priority in CSR practices• Accounting standards in medium and small companies

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Thank you!Questions?

www.ua-energy.org/eiti

www.qclub.org.ua