Ukraine is an independent republic in the Commonwealth of Independent States. Ukraine has one of the most energy-intensive economies in the industrialised world. While energy consumption has dropped since the country's independence, reliance on imports, particularly on gas from Russia, has not declined. Due to its geographic position, the country also plays a major role in securing Europe's energy needs: 84% of Russian gas supplies to Europe transit through Ukraine via pipelines. Natural gas is by far the most important primary energy source in Ukraine, followed by coal, nuclear and oil. Energy assets have been partially privatised, and the government plans further privatisations particularly in the electricity and coal sectors. Competition is strongest in the oil products market, and there are also markets for electricity and coal. IEA has published an in-depth review of Ukraine in 2006.
Ukrainian energy policy is driven by the country’s strong desire to improve energy security and reduce natural gas imports. The majority of its energy supply comes from or through Russia. Since it gained political independence in 1991, Ukraine has made some progress in reducing its dependence on energy imports, primarily by improving energy efficiency. At present, Ukrainian energy policy remains mainly focused on energy production, thus there is much opportunity to achieve greater gains through energy efficiency. However, domestic energy prices have typically been well below international levels; this limits investment in infrastructure, as well as incentives for efficiency. In addition, the government maintains a strong role in owning and regulating energy assets; this is often done in a way which minimises competition and, hence, reduces efficiency.
Ukraine contends with tremendous changes in the international energy scene as energy prices are growing globally. The rate of price increases is particularly fast in Ukraine because the country must adjust to new terms from Russia at the same time. Today, most of Ukraine’s oil and gas – and all of its nuclear fuel – comes from or through Russia. This will not change quickly. Tension between Ukraine and its main energy supplier has grown in recent years. Because of its geographic position, Ukraine does not have many affordable and accessible supply alternatives.
Energy Policies Beyond IEA Countries Series - Ukraine 2012 Review
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