“If we hope to strengthen our security and control our own foreign policy, we can offer no less of a commitment to energy independence” – declared then U.S. Senator and now President of the United States, Barack Obama, more than 10 years ago in a speech titled Energy Security is National Security. If this is true for the strongest economy in the world backed by unsurpassed military might, this is doubly so for my own country, Ukraine, which has paid dearly for failed energy policies in the last 25 years.
Energy independence is within Ukraine’s reach. But we can only achieve it with enlightened policymaking, support from the international community, and, most importantly, unwavering political will from all three branches of our government to combat corruption. We must keep the momentum and our immediate priority should be to leverage a ready-made mechanism known as the Extractive Industries Transparency Initiative (EITI).
EITI sets an international standard for openness around the management of revenues from natural resources. Governments disclose how much revenue they receive from extractive companies operating in their country and these companies disclose how much they pay. This information is published in a report available to the public and reconciled independently before its release. The report also contains information on legal and regulatory structures and is often a good reference for potential investors and civil society.
Norway and Kazakhstan – two oil-rich nations – are both EITI compliant. Ukraine cannot afford to lag behind and as a member of the EITI International Board, I am working with partners from the private sector, civil society and the World Bank to advance extractives revenue transparency, both globally and locally in Ukraine.
Ukraine’s EITI report discloses reliable figures about the money flowing to the government from oil and gas companies operating in Ukraine and transporting gas to Europe. This information allows citizens to better assess how much revenue the government is getting in order to hold them accountable for how that revenue is managed. Transparency will also reassure investors, which is crucial to boosting domestic supply and bringing reliable, affordable energy to the Ukrainian people.
Despite the turmoil in Ukraine over the past two years, EITI leaders in the country have made impressive progress and should be commended. Legislation that mandates EITI participation for government agencies, state-owned enterprises and companies in the oil and gas sector was passed by the parliament, signed by President Poroshenko, and came into effect July 2015. Although it only covers the oil and gas sector for now, plans are underway to extend the program to iron ore. At the same time, the Ministry of Energy developed bylaws that specify the scope of EITI reporting, which entities are required to participate, and the implications of non-participation. In effect, EITI will not be voluntary in Ukraine as it is in many other countries, but mandatory, with implications for non-compliance. This is a clear sign to investors: Ukraine is serious about improving transparency in its extractive industries.
As we continue our drive towards energy independence, there will be no silver bullet. Instead, just as the experience was in the United States, we will find a compilation of solutions starting from improvements in energy efficiency and increased domestic production to stronger FDI inflows and better policies. EITI implementation in Ukraine, supported by the World Bank and international donors, will be a pivotal piece in this puzzle and an important step in transforming the Ukrainian energy sector, bringing reliable, affordable energy to all citizens.