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Why Sign the Protocol?

03 June, 00:00

Ukraine will not operate the Odesa-Brody pipeline in the reverse mode since the primary route offers the best prospects for further development of the project, Ukrtransnafta Chairman of the Board Oleksandr Todiychuk stated on May 27 during a joint Ukrainian-Polish presentation of the project. According to Mr. Todiychuk, his deputy Stanislav Vasylenko, who signed the protocol of intent, lacked the authority to do so, and the official Ukrtransnafta seal has not been affixed to the document. Ukraine’s Fuel and Energy Minister Serhiy Yermilov also ruled out the possibility of operating the pipeline from Brody to Odesa. “The president and prime minister of Ukraine have issued a directive for this conference, under which the route will be operated in the following order: Odesa-Brody-Plock,” he said. This situation gives rise to a series of questions. What about the oil and gas protocols? Who is to blame for signing them and for the damage they have done to Ukraine’s reputation as a partner in the European energy market?

It will be recalled that these statements are in fact comments on the feature carried in our previous issue on the signing of a protocol of intent (the editors have a copy of this protocol). It envisions creating a new route for Russian oil exports via Ukraine using the Odesa-Brody pipeline operating in reverse mode. Ukrainian officials, who learned this news on their way to Brussels, are apparently trying to distance themselves from the protocol. Thus, if subordinate state organizations signed the document behind the back of the country’s leadership, then questions must be asked about who is managing Ukraine’s fuel-and-energy sector in general and the Naftohaz Company in particular. Maybe, as is customary here, this obvious gaffe will be blamed on the print media.

As far as the pipeline is concerned, Mr. Todiychuk believes that the economic benefits from operating the pipeline in the reverse mode are misleading. Thus, calculations confirming that pumping oil in the direction of Gdansk will be more costly than to Novorosiysk are based on last year’s tariffs for the transshipment of oil to tankers. “Today, tariffs for oil transshipment are much higher, and using the Odesa-Brody route is more sound economically,” Mr. Todiychuk stressed.

However, Naftohaz Ukrayiny is confident that the project to pump oil in the reverse mode is justifiable. According to estimates of obviously Naftohaz Ukrayiny specialists (judging from the fact that the relevant chart is in Ukrainian, while the protocol and its addenda are in Russian) the operating profit of the new route will come to 29.6% (at 8 million tons of oil annually), with the annual net profit (obviously, of the Ukrainian side) of $14 million and budget receipts of UAH 61.2 million or $11.5 million. One of the protocol signatories, the Tiumen Oil Company, will extend an oil credit to fill the pipeline with process oil (425,000 tones on 12% interest), as well as supply its own and other companies’ oil (9 million tons). It is surprising, however, that the signatories of the protocol did not bother to wait for the decision of their respective governments on this issue and “agreed to start taking measures to ensure the transport of Russian oil for export via the Pivdenny terminal along the Samara-Mozyr-Brody-Pivdenny route, with the Odesa-Brody section operating in the reverse mode.” What is meant by “start taking measures?” What is even more surprising is Russia’s Transneft Company attempting to ensure “technical capabilities of the oil transport system to pump Russian oil to the port of Pivdenny via the Samara-Mozyr-Brody-Pivdenny route.” Perhaps only the operator of this system — which includes the Ukrainian pipeline — can cope with this. Or maybe there are some other secret agreements on the management of the Ukrainian pipeline as well?

The international and especially European community will have to examine this issue alongside the Ukrainian government. European Commission Director for External Affairs Hages Migarelli stressed in his opening speech at the industrial conference, The Odesa-Brody- Plock Oil Transport Route, that the EC views Ukraine’s stand in this project as the first test of cooperation with it. As a diplomat of one of the countries interested in the Ukrainian oil transport route told The Day in this connection, “It feels bad to be fooled.”

On May 28 The Day received a statement of the Naftohaz Ukrayiny (NU) national joint-stock company’s press center “on why loading the Odesa-Brody oil pipeline has become a political issue,” which says, among other things, that “information on the Odesa-Brody project was deliberately leaked on the eve of presentation in Brussels of the European Oil Transit Corridor by individuals close to The Day.” Further, “these individuals” are accused of “deliberately provoking an international scandal and thus causing significant damage to Ukraine’s reputation on the international arena.”

Indeed, on May 24, on the eve of the Odesa-Brody project presentation in Brussels, Den/The Day reported (incidentally, quoting NU spokesman Kostiantyn Borodin) that Ukrtransnafta, Transneft, Naftohaz Ukrayiny, and the Tiumen Oil Company had signed a letter of intent on a new route to export Russian oil across Ukrainian territory involving shipment at Port Pivdenny and utilization of the Odesa-Brody oil pipeline in the reverse direction. According to The Day’s information, when Mr. Borodin received the newspaper’s request to confirm or deny the existence of this document, he turned to and got permission from Naftohaz Ukrayiny management. Only after this did he confirm that the protocol had indeed been signed and commented briefly. The Day printed the full version of Mr. Borodin’s comment, and judging by the NU statement, they have no complaints about our newspaper.

Therefore, this raises a question: who can and under these circumstances, be called “individuals close to the newspaper Den/The Day” and accused, together with journalists, of deliberately provoking an international scandal? Moreover, what does this unprecedented strongly worded statement mean?

Analysis of the statement’s reasoning makes it possible to conclude that by “individuals close to Den/The Day” its authors have in mind Ukrtransnafta managers who opted for a scandal, “being unable to find over a span of two years economic arguments or real partners to put the northern route into operation.” The statement authors are convinced that “having put their own ambitions above the image of Ukraine, these individuals are trying to pressure the government of Ukraine and transfer the Odesa-Brody operation debate from the economic to the political sphere.” In reality, this is an attempt to put the blame on the press instead of admitting responsibility for signing a secret protocol running counter to the Ukrainian leadership’s decisions. This looks like a search for fall guys and rivalry within the top echelons of the energy sector.

Interestingly enough, the statement authors say that the protocol “is not binding on any of the parties.” Yet, in the very next paragraph, they claim it is “the only document that contains written guarantees that the Odesa-Brody oil pipeline will be loaded with at least 9 million tons of anticorrosion oil by the Transneft and TNC companies.” Were they too nervous to use logic?

With this in view, The Day declares that it has hitherto not known about and is not about to exacerbate any internal differences between Naftohaz Ukrayiny and Ukrtransnafta. Yet, this situation obviously requires that the government take urgent action. As to indirect accusations against The Day and the media as a whole, which are between the lines of this statement, it is not an eye-opener for the Ukrainian press. Governmental agencies often shift the blame for their own pratfalls (e.g., the signing of the protocol, not the information about it) to the journalists who have reported such things to the public. Another fact also proves that Naftohaz is substituting spin-control for a clear-cut position either disavowing the protocol or admitting their responsibility for the problems created by its being signed. A prompt contribution to this dispute has been made by the electronic publication Ukrayinska pravda which recently published an article with the eye-catching headline “Games Around an Empty Pipe,” many provisions of which surprisingly coincide with those of the statement in question. It is The Day’s policy to refrain from polemics about its colleagues, but Ukrayinska pravda’s article goes beyond ethical limits. In particular, the article claims that The Day since a certain moment has been actively pouring scorn on the Odessa-Brody project, which is a bald-faced lie. Of course, our newspaper and this writer in particular have repeatedly raised this issue since the outset. We have never opposed the project. We have only been warning that if oil supply sources were not found in time and foreign companies were not attracted by establishing an international consortium, the oil pipeline could remain dry. Does this danger no longer exist today, two years after the construction ended, thanks to the efforts of the cabinet before last? Is this not the reason why the back-pumping problem has arisen? Ironically, the article that in fact plays for the oil pipeline’s reversal (by meeting the interests of Russian oil company lobbyists) was carried by a publication funded by US taxpayers.

At the same time, NU’s claim that The Day’s material has damaged Ukraine’s reputation on the international arena also seems very far from the truth. This was the wish of those who organized signing this secret protocol a month before the Brussels presentation.

As Ukrainian Vice Premier Vitaly Haiduk told the BBC, the declaration signed in Brussels by Ukraine, Poland, and the EU is “another indication that the (Odesa-Brody-Gdansk) project has ceased to be a purely Ukrainian or Ukrainian-Polish undertaking, that it is a common European project enjoying the political support of the European Commission and the governments of Poland and Ukraine. Now we stand a very good chance to continue cooperation.”

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