In what looks like a repudiation of the guilt laid at its feet by Tymoschenko, Viktor Vekselberg-owned Gazeks — the gas transportation company that owns Dneprogaz — claimed that the degradation of Ukraine’s gas distribution network has been the result of a concerted effort by the government to consolidate bankrupted firms. As a result, the country’s gas infrastructure is now at a “critical” level. From Zerkalo Nedely, quoting the report submitted by the head of IES (Gazeks’ parent company), Mikhail Slobodin:
“Such a de facto consolidation has been implemented by UkrGazEnergo with close collaboration from government agencies, experts note. Various forms of coercion were used for this consolidation, including through financial instruments, contractual terms for the supply of gas and possession of the [distribution] networks, the recall of [a company’s distribution] license, and other methods.”
The report goes on to list statistics supporting its claim about the poor state of the network’s infrastructure, stating that the average age of the network is 40 years, and half of it needs to be replaced in the next 10 years.
Following the tragic gas explosion in Dnepropetrovsk that claimed 23 lives, expected future PM Tymoschenko blamed the owners of local gas distributor Dneprogaz for shirking their responsibility for infrastructure refurbishment and a general disregard for the public’s safety.
In the face of the accusations, the firm has stressed that it is awaiting the results of forensic reports before taking any responsibility — “We do not acknowledge our fault until our involvement is proved.” While Gazeks has agreed to provide about $100,000 for each victim, the company asserts that it is not compensation, but “material aid.”
Zerkalo Nedely has a longer piece about Yushchenko’s efforts to reassert control over so-called “natural monopolies.” The report by IES mentioned above was in fact submitted by the firm’s head at a roundtable sponsored by Yushchenko’s compatriots on the level of government control in these “natural monopolies.” These seem to include “strategic” industries such as transport, telecommunications, gas, electricity, heat and water.
The Ukrainian government is far from blameless in the sorry state of much of the country’s public utilities, and likely needs to take a more active role in their regulation. However, the difficult task will be in finding a balance between state and market oversight, as I still believe that increased liberalization of gas, heating and electricity markets will in the long run be necessary — and beneficial — to the upgrading of key utility infrastructure.