EU, Ukraine to agree on gas network repairs and reforms

Mar 20, 2009, 17:24 GMT

Brussels - The European Union and Ukraine on Monday are set to agree on a programme of political reforms and physical repairs to the former-Soviet state's giant gas network, EU officials said.

One fifth of all the natural gas consumed in the EU flows through Ukraine's 13,500-kilometre network of gas pipelines, but experts say that that network will need some 2.5 billion euros (3.4 billion dollars) in investment over the next six years just to keep pipes and pumping stations in running order.

Analysts say that Ukrainian monopoly Naftogaz, which runs the pipeline system, finds it hard to attract the necessary investment because of a perceived lack of transparency and accountability both in its management and in Ukraine's top political leadership.

On Monday, Ukraine's President Viktor Yushchenko and Prime Minister Yulia Tymoshenko - currently feuding ahead of presidential elections - are set to meet the head of the EU's executive, Jose Manuel Barroso, and officials from the World Bank, European Investment Bank and energy companies in Brussels.

At the meeting, they are expected to sign a joint declaration committing Ukraine to reforming the rules by which it operates its gas network.

That should pave the way for Western and Russian donors to invest in the renovation of the network, EU diplomats told Deutsche Presse-Agentur dpa.

The question of Ukraine's gas transit system has been a highly-charged one ever since a row with Russia in 2005-06 provoked Russian gas monopoly Gazprom to shut supplies off to Ukraine, causing severe shortfalls in Europe.

The drama was repeated in January in an ill-tempered spat that crippled gas supplies to the EU for two weeks.

The EU is now keen to reduce its dependency on both Russia and Ukraine as energy suppliers. On Thursday, EU leaders agreed to give 200 million euros to the 'Nabucco' pipeline project, which is meant to bypass both countries and bring gas direct from the Caspian Sea to Europe.