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Monday, February 04, 2008

Yushchenko Endorses RosUkrEnergo?

If anyone has a way of telling “I can do better than that,” let’s give it some thought. But I would like to have everyone grasp this one thing. Remember: Ukraine today has the cheapest gas. What’s our goal? Is it to have the cheapest gas or to answer the question of who supplies it and how they supply it? Apparently, it’s the first that interests us. We should have the cheapest gas and the best fees. That’s our goal. Transit fees, that is.

Mr. President, for a country that has the highest energy costs per dollar of output in the industrialized world, the goal is energy efficiency, not cheap energy.

Aside from transit considerations, we should also distinguish financial costs from opportunity costs. Social and geopolitical costs should also be factored into the energy equation. Cheap gas does not necessarily translate into better living standards. In fact, the opposite may true in Ukraine: The cheaper the gas, the cheaper the citizen.

For industrialists, lower gas prices create a moral hazard: the incentive to “gradualize” investments in energy efficient hardware. When Ukraine buys “cheap” gas, it is ordinary Ukrainians who pick up the tab. Ironically, cheap gas buys them a Cinderella economy and a ticket to a Latin American income distribution.

Bottom line, the oligarchs are having the best of both worlds: milking the old economy while drinking wine at the world’s finest resorts. Ordinary Ukrainians have only one world: stabilnist, or the oligarch-induced status quo. Of course, some of them have left for less "stable" and more economically free places like Europe and North America. To those who haven’t, stabilnist hasn’t provided enough nourishment to stem depopulation.

That’s why Ukrainians should know the real price of the status quo cooked on "cheap" gas. The sooner Ukraine matures to pay the average European rate, the stronger she will be in confronting domestic and foreign special interests. At any rate, one shouldn’t pledge wholesale support for a supplier that raises more questions than answers.

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