Artur Lorkowski, Director of the Energy Community Secretariat
We will help Ukraine recover damages from the aggressor
15.12.2022 17:40

Russia's destruction of Ukraine's critical infrastructure with the aim of plunging the country into darkness and cold and breaking the will of Ukrainians to resist makes partners’ energy support for Ukraine one of the key factors. The Ukraine Energy Support Fund, created in April by the Energy Community with the support of the European Commission, plays a major role in the organization and coordination of assistance in this area.

Ukrinform spoke with the Director of the Secretariat of the Energy Community, Artur Lorkowski, to learn how much money has already been raised for the Fund, what are the priorities for their use, how are the purchases carried out, as well as what are the assessments of the damage caused by the aggressor power to Ukraine’s energy and environment.

Partners’ awareness of Ukrainian needs in the energy sector rises

- The Energy Community Secretariat has established in April the Ukraine Energy Support Fund. How many countries have donated to the Fund and how much money has been allocated for its work?

 - Indeed, in early April, the Energy Community Secretariat set up the legal framework for the Ukraine Energy Support Fund to counteract the impact of the Russian invasion upon the request of the European Commission and in agreement with the Ministry of Energy of Ukraine.

At present, EUR 61,5 million are pledged to the Fund from 5 countries as well as international organizations. We are expecting this amount to increase in the coming weeks as the awareness of Ukrainian needs in the energy sector rises.

- What are the priorities in the use of the Fund's resources and how have they changed after the recent massive Russian attacks on Ukrainian energy infrastructure?

- At this stage, the procurements under the Fund are primarily directed at Ukrenergo, which has suffered the most from Russia’s targeted campaign. In principle, the Ukrainian Ministry of Energy prioritizes the needs to be covered by the fund.

- Has the mechanism for assessing the real needs for emergency financing of economic entities operating in the energy sector of Ukraine been approved, and has the international procurement agency responsible for selecting suppliers been determined?

- Under the Ukraine Energy Support Fund managed by the Secretariat, it is for Ukrainian energy companies to assess their demand and submit support requests to the Ministry of Energy for verification and prioritization. The needed equipment or fuel is then purchased on behalf of that company through an independent procurement agent.

The mechanism for providing Ukraine with energy equipment has been well established

-  It is clear that the problem of finding equipment to restore the damaged or destroyed critical infrastructure is not limited to finance. After all, it is mainly about specific complex equipment (sometimes not serial, but made according to individual projects), which cannot be bought in a regular supermarket and which takes time to produce. Can Ukraine count on such an authoritative institution as the Energy Community in the search for "free" components and assemblies not only in Europe but also on other continents?

- When it comes to procurement under the Ukraine Energy Support Fund, the Secretariat matches the demand in Ukraine with possible supplies worldwide through the close communication with prospective vendors. The independent procurement agent negotiates the best available conditions, including in terms of quality, price and time in line with the highest international standards.

Since March this year, the Energy Community has engaged in coordinating emergency energy equipment to Ukraine. The mechanism established with the EU Emergency Response Coordination Center is now well established and the Secretariat’s Ukraine Support Task Force has coordinated more than 40 shipments from 20 countries weighing 740 metric tons. The most recent deliveries to Ukraine include 248 transformers from Lithuania and 100 power generators from France. More than 50 shipments are either under preparation or on the way.

However, it is true that the transport of such heavy and bulky equipment is not straight forward and only a handful of companies can manage such deliveries. For example, at the moment the Task Force is assisting in the donation of two autotransformers, one from Germany and one from Lithuania, each weighing more than 200 tons.

Damages need to be recovered from the aggressor state

 - One of the areas of cooperation between Ukraine and the Energy Community is the development of international mechanisms for compensation by the aggressor state for the damage caused to the energy sector of Ukraine, as well as making proposals to Ukraine's Recovery Plan. How do you see these mechanisms of compensation, and how much could it cost to rebuild the energy sector of Ukraine?

 - It would be difficult to come up with a definitive amount. As of the end of September, the estimated damages to the Ukrainian energy sector, including utilities and district heating sectors, were at least $5.9 bln. As of November 22, the damage inflicted on the Ukrainian power transmission system operator Ukrenergo only was estimated at more than $2 bln.

 These damages need to be recovered from the aggressor state. Full compensation is a basic principle of international law. There are several initiatives and proposals with regard to the best available fora and procedural framework. The Secretariat’ Dispute Resolution and Negotiation Centre is cooperating with Ukrenergo on the best and fastest options to receive monetary compensation, with the support of the international legal community.

 - Since March, Ukraine has joined the European energy network ENTSO-E. Are the partners able to provide additional electricity flows to replace part of the lost Ukrainian generation under the current difficult conditions for the entire European energy sector? Do they have the technical capabilities and transmission capacity for this?

- The synchronization of the Ukrainian and Moldovan power systems with Continental Europe in March 2022 helps their power systems to operate stably, providing emergency supply and supporting the frequency level which must be kept at 50 Hz.

 Transmission capacities between neighboring EU member states (Poland, Slovakia, Hungary and Romania) and Ukraine/Moldova are large, but still limited during emergency synchronization due to the safety rules of transmission system operation in Ukraine and the EU.

Gas TSO has demonstrated an unimaginable level of professionalism

 - Ukraine is also interested in participation in global and regional gas projects, in particular, in the Eastring pipeline project. How do you assess the accession of the Ukrainian GTS Operator to this initiative and what are the prospects for the unification of the European and Ukrainian gas markets in general?

- Like Ukrenergo, the Ukrainian gas transmission system operator (TSO) has demonstrated an unimaginable level of professionalism and dedication in performing its tasks. In the most difficult situation that could occur in a TSO’s operation, it continues to provide uninterrupted gas flows to its customers and enable gas transit to the EU and Moldova.

The Energy Community has made good progress in unbundling ad certifying the Gas TSO of Ukraine. There are obstacles remaining, including on the corporate governance level, and we will continue to work together with Ukrainian and European partners to move this process forward.

Ukraine Gas TSO has been very proactive in various European gas initiatives, such as Energy Regional Platforms under the RePowerEU which aim at removing obstacles to trade and increase diversification, in the CESEC, SEEGAS initiative, where the Gas TSO of Ukraine has actively participated and proposed solutions to long-standing problems. This includes short to mid-term projects which should enable the independence of Europe and Ukraine from Russian fossil fuels and also projects with a more long term perspective that would kick off gas sector decarbonisation and tap the enormous potential of low carbon gases to be produced and exported from Ukraine.

Russia’s invasion has already inflicted 36 billion euros in environmental damage

 - The Russian aggressor, among other things, has caused enormous environmental damage. Kyiv counts on the support of your institution in approving the methodology for assessing the damage caused and in implementing joint projects to protect the environment. Are there any preliminary figures on the environmental damage caused by Russian aggression? What cooperation projects do you consider as top priority in this area?

- With over 2000 incidents of environmental damage recorded since the beginning of the war, the Russian aggression is having detrimental effects on Ukraine’s environment, with transboundary impact. The Russian Federation has deliberately targeted oil refineries, industrial, power and waste facilities, thus causing pollution of water, air and soil, physical damage to sensitive landscapes, loss of forests and nature protection sites and massive CO2 emissions.

Based on the report of the Ukrainian minister responsible for the environment, Ruslan Strilets, it is estimated that Russia’s invasion has already inflicted 36 billion euros in environmental damage: the cost of war-related air pollution is close to 25 billion euros, while the cost of damage to soil is more than 11 billion euros. The Russian Federation must be held accountable for the damages and losses inflicted on Ukraine’s environment and the Secretariat with its Dispute Resolution and Negotiation Centre has proposed to support Ukraine in legal actions in front of national and international courts and tribunals against the Russian Federation in order to obtain payment of just compensation for environmental damages including the climate-related losses and damages.

The Energy Community will respond to Russia’s energy blackmail

 - Deliberate attacks of the Russian aggressor on the Ukrainian energy sector also negatively affect the level of energy security of the whole Europe. What are the ways to strengthen this energy security and achieve unity of all member states of the Energy Community without exception in confronting Russia’s energy blackmail and terrorism? Should we expect any decisions on this issue as a result of the 20th Ministerial Council of the Energy Community, which will be held on December 15 in Vienna?

- Indeed, energy security will be high on the agenda of Thursday’s Ministerial Council and dealing with Russia’s energy blackmail will be in the spotlight. The resolute response of the whole of the Energy Community is to implement the REPowerEU package as fast as possible, i.e. phase-out dependence on Russian gas,  adopt ambitious climate and energy targets, join the gas demand and joint purchasing of gas, and speed up the integration of electricity markets.

- In this regard, how do you assess the restriction taken on the European and world markets for Russian oil and gas? Will they be effective in reducing Moscow's earnings to finance the war?

- The price cap on Russian oil applicable from 5 December 2022 will limit the price surge driven by extraordinary market conditions and drastically reduce the revenues Russia has earned from oil. It will also serve to stabilize global energy prices while mitigating adverse consequences on energy supply to third countries.

Wasyl Korotkyi, Vienna

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