1. EU-Ukraine:
Partners for securing
E U-U K R A I N E
gas to Europe
International investment conference
on the modernisation of Ukraine’s
gas transit system
Brussels, 23rd March 2009

2. E U - U k r a i n E E n E r g y r E l at i o n s 5
M E M o r a n D U M o F U n D E r s ta n D i n g o n c o - o p E r at i o n
in thE FiElD oF EnErgy bEtwEEn thE EUropEan Union
anD UkrainE 7
Joint EU-UkrainE rEport:
i M p l E M E n tat i o n o F t h E E U - U k r a i n E M E M o r a n D U M
o F U n D E r s ta n D i n g o n E n E r g y c o o p E r at i o n D U r i n g 2 0 0 6 13
sEconD Joint EU-UkrainE rEport:
i M p l E M E n tat i o n o F t h E E U - U k r a i n E M E M o r a n D U M
o F U n D E r s t a n D i n g o n E n E r g y c o o p E r a t i o n D U r i n g 2 0 07 19
thirD Joint EU-UkrainE rEport:
i M p l E M E n tat i o n o F t h E E U - U k r a i n E M E M o r a n D U M
o F U n D E r s ta n D i n g o n E n E r g y c o o p E r at i o n D U r i n g 2 0 0 8 25
r oa D M a p — E U - U k r a i n E wo r k i n g g r o U p o n E n E r g y
E F F i c i E n c y, r E n E wa b l E E n E r g i E s a n D M E a s U r E s t o t a c k l E
c l i M at E c h a n g E 31
E n E r g y c o M M U n i t y t r E at y 35
E a s t E r n pa r t n E r s h i p 37
2

3. Foreword
the secure flow of energy is fundamental for our in the future, for electricity. it is also a country
economies and our way of life. and energy security that has expressed, on many occasions, its desire
has become, along with climate change, one of the to be fully integrated into the EU’s internal energy
key global challenges of the 21st century. market.
the European Union is becoming ever more the gas transit system of Ukraine represents the
dependent on supplies of energy from outside its backbone of gas supplies to the rest of Europe,
borders. competitive, transparent and well-func- accounting for 20% of the EU’s gas consumption
tioning energy markets that provide security of and 80% of russia’s gas exports to the EU, as well
demand, security of supply and security of transit as carrying substantial quantities of central asian
and which are based on a modern, efficient and gas. it is our common responsibility to ensure that
reliable transportation infrastructure are a key pol- this infrastructure operates at the highest levels
icy objective. of efficiency, transparency and reliability. we are
convinced that the new phase of strategic coopera-
Ukraine is an important neighbour for the EU tion between Ukraine and the EU, that we will start
and a crucial energy partner, particularly as a tran- today, will bring Europe closer together and not
sit country for oil and gas flows from russia and, only in the sphere of energy security.
3

4. 4
E U-U K R A I N E

5. EU-UkrainE EnErgy rElations
Ukraine is a key transit country for oil and gas nuclear safety;
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supplies from russia to the EU and has expressed }} integration of electricity and gas mar-
the
its wish to be integrated in the EU and south East kets;
Europe electricity markets. Energy is therefore a Enhancing the security of energy supplies and
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sector that will continue to be at the centre of the transit of hydrocarbons;
EU-Ukraine relations and where co-operation will improving the effectiveness, safety and envi-
}}
continue to grow substantially over the coming ronmental standards in the coal sector.
years.
in addition, as foreseen in the Memorandum of
on 21st February 2005, the general affairs and Understanding on energy, a roadmap covering the
fields of energy efficiency, renewables and meas-
External relations council underlined that, with
ures to tackle climate change was agreed in March
the appointment of a new government in Ukraine
2008.
and its ambitious programme of reforms, the EU
was committed to supporting Ukraine at this cru-
cial moment. as part of this, it was decided to since the signature of the Memorandum in 2005,
enhance co-operation in the energy sector, where significant progress has been achieved in imple-
the priorities for EU action are: menting the objectives outlined for individual sec-
tors and annual progress reports are regularly
development of appropriate conditions endorsed at the EU-Ukraine summits.
}}
for facilitating the creation of an internal
Ukrainian gas and electricity market through on nuclear safety, the European Union has coop-
a reform, based on the convergence of the erated extensively with Ukraine to improve the 5
regulatory framework with that of the EU; safety of its nuclear power plants and the cher-
promotion of concrete infrastructure projects nobyl site. the tacis nuclear safety programme,
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of common interest with the aim of enhancing which started in 1991, was instrumental in improv-
the security of energy supplies of both Ukraine ing the nuclear safety culture and the shortcom-
and EU. this should include the safe, trans- ings identified by the international atomic Energy
parent and reliable transit of energy resources agency (iaEa). the comprehensive assistance
across Ukraine; provided under tacis included design safety,
implementation of the action plan in the operational safety, the nuclear fuel cycle and waste
}}
framework of EUratoM in order to improve management, off-site emergency preparedness,
nuclear safety; regulatory authorities and their technical sup-
co-operation to effectively address the port organizations. since 2007, this effort is being
}}
challenge of improving energy efficiency and continued under the commission’s instrument for
energy savings, as well as promoting new and nuclear safety cooperation. Euratom/EbrD loans
renewable energy; have also been made available to Ukraine for the
enhancing the physical safety and security of purpose of improving nuclear safety.
}}
the energy infrastructure, including energy
installations, networks and maritime trans- in the context of the first roadmap under the
portation of energy resources. Memorandum of Understanding on energy between
the EU and Ukraine, the European commission is
in order to develop a more ambitious cooperation, currently participating in a joint Ec-iaEa-Ukraine
a Memorandum of Understanding on energy1 was project to assess the safety of the Ukrainian nuclear
signed at the margins of the EU-Ukraine summit power plants. this project is expected to demon-
in December 2005. the Memorandum establishes a strate the improvements which have been made
joint strategy towards the progressive integration and determine any corrective actions that may still
of the Ukrainian energy market with that of the EU be required in relation to the latest iaEa safety
and consists of road maps covering four specific standards.
areas, namely:
(1) For the Memorandum of Understanding on energy, see page 7.
(2) For the progress reports, see pages 13, 19 and 25 respectively.

6. nelled through the Coal Sector Policy Support
the community is also the largest contributor
Programme, which aims to support Ukraine’s
to the chernobyl projects related to the conversion
of the site to make it environmentally safe. in this
stakeholders in reforming and restructuring the
respect, the commission provides direct contribu- coal-mining industry in a socially-responsible and
tions to projects such as the industrial complex for
cost-effective manner. EU support is also envis-
radioactive waste Management (icrsM) and to aged for improving occupational safety standards
international funds managed by the EbrD, namely and for institutional strengthening in the Ukrainian
the chernobyl shelter Fund and the nuclear safety coal mining industry. implementation of the pre-
account. paratory phases of the project started in september
2008, which included expert missions to Ukraine’s
significant progress is also being made in the coal mining regions (Donetsk and luhansk).
second roadmap on the integration of Ukraine’s
electricity and gas markets with those of the EU, Ukraine has a large potential for energy sav-
including with respect to the strengthening of the ings and further strengthening of the co-operation
national Energy regulatory committee (nErc). in between the EU and Ukraine on energy efficiency
november 2006 Ukraine became an observer in the and renewable energy sources has been agreed in
Energy Community Treaty. it has since applied the fifth roadmap. the co-operation areas include
for full membership of this treaty, under which the building sector and the development of alterna-
participants commit themselves to fully imple- tive and renewable energy sources, with a special
ment the acquis communautaire on electricity and focus on biomass.
gas sectors and renewable energy, including the
respective frameworks in the field of competition
and environment.
6
with respect to the third roadmap on the secu-
rity of energy supplies and the transit of hydrocar-
bons, Ukraine is committed to taking measures to
establish minimum oil stocks, a welcome step that
should help enhance security of supply. another
significant development is Ukraine’s commitment
to reverse the flow of the odessa-brody pipeline in
the south-north direction. this, combined with the
realisation of the project to extend the pipeline to
plock in central poland, should allow in the future
an increased flow of hydrocarbons from the caspian
region.
with respect to Ukraine’s gas network, the com-
mission, together with the Eib, EbrD and world
bank, is examining how to mobilize funds in order
to help support the modernization of the Ukrain-
ian gas transit system, which will increase the effi-
ciency, the reliability and the predictability of gas
supplies. in this context, a Joint EU-Ukraine minis-
terial level Investment Conference on the Modern-
isation of Ukraine’s Gas Transit System is taking
place in brussels on 23rd March 2009.
the fourth roadmap is focused on the coal sec-
tor, which plays a crucial role in the Ukrainian
economy, in particular for electricity generation
and consumption. this co-operation is chan-

7. MEMorandUM
oF UndErstanding
on co-oPEration
in thE FiEld oF EnErgy
bEtwEEn thE EUroPEan
Union and UkrainE

8. PrEaMblE
Having regard to the communication of the situation of the power sector in general and of the
commission to the council and the European par- nuclear sector in particular 2.
liament on the Development of Energy policy for
the Enlarged European Union its neighbours and Recalling the existing agreement between
partner countries. Euratom and Ukraine in the field of nuclear safety
and the new agreement for co-operation in the
Considering the Memorandum of Understanding peaceful Uses of nuclear Energy between Euratom
between the governments of the g7 countries and the and the cabinet of Ministers of Ukraine.
commission of the European communities and the
government of Ukraine on the closure of the cher- Taking note of the new EU initiative in energy
nobyl npp of 20 December 1995, which included, efficiency, detailed in the recent green paper.
inter alia, the power sector restructuring, an Energy
investment programme and nuclear safety. Taking note that Ukraine has expressed its inten-
tion to become an observer as soon as the Energy
Considering the call for an enhanced energy co- community treaty enters into force and, later on,
operation and increased access for Ukraine to Eib to work towards becoming a member of the Energy
financing envisaged in the joint letter of the com- community3.
mission and the council dated 24 January 2005,
and confirmed in the council conclusions on Considering, in connection to the above, that the
Ukraine of 21 February 2005. Eib and the EbrD should be closely involved in the
implementation of this Memorandum.
Recognising that, in the field of energy, the EU
8
and Ukraine share convergent interests and both Recalling that the energy sector remains a key ele-
could benefit from the integration of their respec- ment in EU-Ukraine bilateral relations and Ukraine
tive energy markets, thereby enhancing the energy has benefited of substantial community assistance
security of the European continent. in this context, under the tacis programme for restructuring of the
the gradual adoption by Ukraine of the EU energy energy sector and improvements of nuclear safety
acquis would constitute a significant step towards (under the tacis nuclear safety programme).
Ukraine’s objective of gradual economic integra-
tion and deepening of political co-operation with Whereas:
the EU.
(1) the Ukrainian energy sector is strategic for the
economic and social development of Ukraine
Considering that in the framework of the Euro-
and constitutes also a substantial potential
pean neighbourhood policy (Enp), the EU and
external source of revenue. its gradual con-
Ukraine have decided to step up their energy co-
vergence with the EU’s internal energy market,
operation and that the EU-Ukraine action plan
aiming ultimately at its integration, remains a
(ap) 1 includes seven specific energy-related objec-
shared priority for the EU and Ukraine.
tives aimed at the gradual convergence of EU and
Ukraine’s energy legislation and integration of
(2) the EU and Ukraine face common energy policy
their respective energy markets.
challenges. the diversification and security of
Considering that the EU and Ukraine are deter- energy supplies, nuclear safety, energy market
mined to advance rapidly in realising these objec- reforms, the development and modernisation
tives, as was confirmed during high-level meetings. of energy infrastructures, energy efficiency
and the use of renewable energy sources are
Recalling that nuclear safety has always been key concerns for both parties. an enhanced
a key issue in the relations between the EU and energy co-operation with the EU could boost
Ukraine and that the community has granted a the necessary reforms and, together with an
Euratom loan for k2r4 by which Ukraine is com- improved investment climate, facilitate the
mitted to perform important actions to improve the attraction of the necessary investments both
(1) Endorsed by the Ukraine Co-operation Council on 21 February 2005.
(2) Loan Agreement between Energoatom and Euratom and Guarantee Agreement between Ukraine and Euratom both signed
on 29 July 2004.
(3) The Energy Community covers the European Community and the states and territories of South-East Europe.

9. from iFis’ and the private sector in Ukraine’s iV. structural reform, enhancing safety and
energy sector. environmental standards in the coal sector.
(3) the nuclear sector is a key element of Ukraine’s Both sides further recognise the importance of
security of energy supplies, with 13,835 Mw developing a roadmap for increasing co-operation
of installed capacity, representing 26.1% of in energy efficiency that will also address the pro-
total installed generating capacity in Ukraine. motion of renewable energies and measures to tackle
During the past 10 years it has accounted for climate change, including the emissions from fossil
about half of the electricity generated in the fuel power plants and the use of the joint implemen-
country and offers a significant potential for tation mechanism under the kyoto protocol.
electricity exports. Ukraine, with the support
1. Road Map for Nuclear Safety of
of the community, has elaborated and com-
Operating Ukrainian Nuclear Power Plants
mitted to implementing safety improvement
programmes for all the npp’s. therefore ensur-
ing the highest levels of safety and security 1.1 Ukraine, having 15 nuclear power plants in
remains a key priority for both parties. operation, two of the type VVEr 440 V213 models
and 13 VVEr 1000, intends to maintain the nuclear
(4) Ukraine is a key transit country for hydrocar- option at a significant level. these plants entered
bon’s supplies to the EU with 40% of the EU’s into operation between 1980 and 2004. in this con-
imports of natural gas transiting through the text, both parties emphasise the importance of a
Ukraine network and for oil, in addition to the sustainable improvement of nuclear safety for an
transit through the existing Druzhba network, efficient and reliable energy sector.
the ongoing extension of the odessa-brody oil
pipeline to poland would open a new major 1.2 in order to strengthen public confidence and 9
transit route for EU oil imports from the cas- for the EU to reinforce the role of Ukraine as a trad-
pian basin and the international market. in ing partner in the electricity market, Ukraine must
this context, ensuring a safe, transparent and meet internationally recognized nuclear safety
reliable transit system is of paramount impor- and environmental standards. hence, the safety of
tance for both the EU and Ukraine. nuclear installations is a primary objective for both
parties, who will continue to promote in Ukraine
(5) the coal sector plays a key role in Ukraine’s an efficient nuclear safety culture in line with the
security of energy supplies, accounting for principles of the convention on nuclear safety.
some 50% of indigenous energy production.
key challenges include the continued necessity 1.3 Ukraine will ensure that the nuclear regula-
to reform and restructure the sector, while mit- tor fulfils its mandate as an independent and com-
igating the social and regional consequences, petent safety authority.
as well as improving mine safety and reducing
the environmental impact of coal combustion 1.4 both parties recognise the importance of
through joint implementation projects in the suitable radioactive waste and decommissioning
field of clean coal technologies. programmes. (Ukraine is committed in the frame-
work of the k2r4 agreements to establish the
Both sides recognise that, in order to adopt a Decommissioning Fund and to keep in line with the
comprehensive and balanced approach in terms of overall radioactive waste and spent Fuel plan).
respective commitments and incentives and given
the linkages between the various energy sectors, 1.5 taking into account on-going work, the par-
they resolve to co-operate in roadmaps covering ties agree to conduct a safety evaluation of Ukrain-
the following four specific areas: ian npp’s by the end of 2006 in which Ukrainian
and European commission experts will be involved
i. nuclear safety, alongside external experts. the phare/tacis nuclear
ii. the integration of electricity and gas markets, Experts group will be kept informed on all relevant
iii. Enhancing the security of energy supplies activities planned to be implemented in 2006. this
and the transit of hydrocarbons, overall assessment will verify the compliance with

10. 2.2 In order to allow a smooth transition
international nuclear safety standards and require-
ments, on the basis of the work carried out so far from the existing market structure to an open
and scheduled for the future in order to identify the market, Ukraine will also endeavour to cover the
need for any additional actions, including financial following issues:
aspects. Future EU technical assistance may be con-
sidered in the context of the possibilities that will be a) reform of electricity tariffs and gas pricing,
offered by the new financial instruments in order b) approaches to ease the impact of reforms on
to support the implementation of the ongoing npp vulnerable customers,
upgrading programmes. subsequently, both parties c) the reduction of unregulated losses,
agree to jointly monitor the implementation of the d) the reduction of network losses, in particular
upgrade measures identified. transmission losses,
e) an increase in energy efficiency necessary to
1.6 a joint working group composed of repre- abate demand,
sentatives of the European commission and the rel- f) Measures to ensure full payments for provid-
evant Ukrainian authorities and organisations will ing electricity and gas,
be established to define the work programme for, g) Diversity of supply, including energy substitu-
and co-ordinate the implementation of this section tion by, e.g., renewable energy sources, whilst
of the Memorandum of Understanding. both par- maintaining a free market framework,
ties will ensure that full support is given to this h) optimisation of the energy mix in the elec-
working group to carry out the planned evaluation tricity generation with a view to increase
activities in terms of provision of the necessary efficiency, environmental safety, operational
documentation, information evaluation, verifica- reliability, and security of supply.
tions and eventual recommendations.
2.3 with a view to facilitating the creation of
10
1.7 the working group will submit a report to an open market, Ukraine will endeavour, where
both parties proposing a concrete work programme necessary, to create or strengthen the role of insti-
not later than March 2006. tutions for the operation of an open electricity and
gas market, namely:
2. Road map for the integration
of electricity and gas markets a) by the end of 2006, an Energy regulatory
authority independent of the interests of the
electricity and gas industry, having, as a min-
2.1 the parties will devote their best endeavours
imum, the responsibilities referred to in the
to enable the integration of the Ukrainian electricity
Electricity and gas Directives5.
and gas markets into the European Union’s inter-
nal energy market. For this to be realised requires b) by the end of 2006, electricity and gas transmis-
the implementation of key elements of the acquis sion system operators, having the tasks referred
communautaire on energy, environment, competi- to, and fulfilling the criteria contained in the rel-
tion and renewables 4. a level playing field in terms evant articles of the Electricity and gas Direc-
tives6 with respect to their independence from
of equivalent basic rules with respect to market
access, infrastructure and opening, as well as compat- other activities not related to transmission.
ible environmental and safety standards will facili-
tate substantial electricity trade between the EU and 2.4 as only a minor part of the Ukrainian elec-
Ukraine. with the help of the EU technical assistance, tricity system is physically connected to the EU sys-
Ukraine will endeavour to align its legislation with tem, the parties will devote their best endeavours to
the relevant community rules in line with the time- contribute to the establishment of an interconnec-
table envisaged in the annexes to the Energy com- tion between the UctE system and the Ukrainian
munity treaty. electricity grid system.
(4) Notably those listed in Title II of the Treaty establishing the Energy Community.
(5) Article 23 of the Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for
the internal market in electricity and repealing Directive 96/92/EC, published in the Official Journal L176 of 15.7.2003, and Article
25 of the Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the
internal market in natural gas and repealing Directive 98/30/EC, published in the Official Journal L176 of 15.7.2003.
(6) Articles 9 and 10 of the Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common
rules for the internal market in electricity and repealing Directive 96/92/EC, published in the Official Journal L176 of 15.7.2003, and
Articles 8 and 9 of the Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common
rules for the internal market in natural gas and repealing Directive 98/30/EC, published in the Official Journal L176 of 15.7.2003.