New episode of Ukrainian oligarchs “gold rush”

Immediately after the beginning of the Russian military invasion, President of Ukraine Zelensky started the “virtual tour” on the parliaments of European countries with an appeal “to make a decisive contribution to energy security of whole Europe and the country torn by war.” The reason for this is quite simple: due to military operations, the supply of Russian energy resources to Europe through Ukraine has significantly decreased. So, speaking to the Norwegian parliament, Zelensky described Norway as the largest supplier of hydrocarbons and announced the start of negotiations between Kiev and Oslo on the supply of 5 billion cubic meters of gas to Ukraine as the basis for “long-term bilateral cooperation in this area.”

However, the Norwegian oil and gas industry representatives are not so optimistic unlike President Zelensky. According to experts, there are significant risks of relatively low profitability of common projects due to large-scale corruption in the gas sector of Ukraine.

Since independence in 1991, the gas sector has been the main source of corruption for Ukraine’s elite groups. It has prevented the proper development of national industry and economy, as well as led to even greater dependence on Russian gas.

Ukrainian businessmen in the energy sector had assets to buy locally produced gas at subsidized prices and sell it at market value. The deficit was supposed to be covered by the state budget and could be up to 5% of GDP or 4 billion euros (5.2 billion US dollars) per year. The steady depletion of the budget made Ukraine vulnerable to the influence of its own oligarchic elite, and the gas sector has been a source of corruption among the country’s business tycoons.

Despite Ukraine’s anti-corruption reforms since 2014, the energy sector remains one of the most vulnerable areas of the economy to corruption and related violations. So, the Norwegian professor Veselema Maria Svartdal in 2019 in her Ph.D. thesis summed up the results in the energy sector of Ukraine.

However, Norway’s NATO allies and particularly the United States will continue to convince Oslo to provide Kiev with maximum support in the midst of the Russian-Ukrainian conflict and will force the country to conclude rather controversial agreements in the energy sphere. And no one is going to ask Norwegian oil and gas industry representatives whether they want to do it.