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Analysis
Why energy union can help stabilise Ukraine

Why energy union can help stabilise Ukraine

Chance for Brussels to bring Kiev and Moscow into low carbon plan 

by Ruud Lubbers and Paul van Seters

Wed 18 Mar 2015

When European leaders meet in Brussels on Thursday and Friday, they have a serious opportunity to link European energy union with stabilising Ukraine. In Minsk last month the leaders of Ukraine, Russia, France, and Germany reached an agreement to end the war in eastern Ukraine.

Whether the accord will work is still far from certain. What is clear is that the EU has particular responsibility to ensure an effective follow-up. Rather than simply waiting passively to see whether the ceasefire holds, Europe has the chance of establishing Ukraine’s place in energy union as an important component of a peace plan.

The priorities of energy union are energy security, an effective internal energy market, energy efficiency, a functioning low-carbon economy, and support for research and innovation. Ukraine should be part of this. Countries like Ukraine with an EU association agreement should bring all their energy supply contracts (including, crucially, those with Russia) under the EU’s oversight.

The gas deal between the EU, Ukraine and Russia announced on 30 October – despite the war in eastern Ukraine that continued throughout the autumn and winter – still provides a chance to bring the parties closer together. Energy union can become the cornerstone of a healthy relationship between Brussels, Kiev, and Moscow.

Three conditions must be fulfilled. First, a diplomatic solution is needed for Crimea, which could remain Ukrainian territory, but with Russian administrative authority over Sevastopol and its naval base through a long-term lease or similar legal construct. Second, Ukraine should be reconstituted into a federal republic, with extensive autonomy for Donetsk and Luhansk in the east. If autonomy within Ukraine proves impossible, then these regions’ separation might be the sole alternative. Third, energy union has to be extended to Ukraine with an eye on Kiev’s full participation in the UN climate summit in December in Paris, where Europe must show it is serious about the transition to a low carbon economy.

A sovereign federal Ukraine must ensure that EU anti-corruption regulations apply to all its energy arrangements, especially with Russia. A working anti-corruption programme in Ukraine is a condition for disbursement of Kiev’s $17.5bn IMF loan.

Europe has the opportunity to overcome its glaring shortcomings over the Ukrainian crisis and demonstrate the importance of extensive European co-operation for joint peace and security. Russian President Vladimir Putin will have to accept the EU requires that all energy contracts with Ukraine need EU consent to be legally valid. This is not just a constraint since Putin has the opportunity of forging a bilateral accord with Brussels that will make Russia, too, part of a plan for improving energy security and combating climate change.

A viable federal Ukraine associated with the EU offers economic and political advantages for Putin and Russia, as well as for the whole of Europe. A generous and strong EU has to act with determination to create a peaceful alternative for Putin – and here energy has a vital role to play.

Ruud Lubbers is a former Netherlands prime minister and Paul van Seters is Professor at Tilburg University.

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