Ukraine adopts law on sanctions, gas system operator privatization

Обзоры по компаниям и отраслям 15.08.2014 Ukraine’s parliament (the Rada) voted on Aug. 14 to approve a sanctions law that enables 28 types of sectoral or personal sanctions to be imposed against states, foreign individuals and legal entities (non-residents or those controlled by non-residents). The sanctions may be imposed against those involved in terrorist activity or any other actions that threaten Ukraine’s security, integrity, or the rights of its citizens. The list of sanctions did not change much since the first reading of the bill approved last week and includes asset freezes, trade bans, and limits or bans of transit of any resources though Ukraine. The bill's final version does not contain controversial sanctions against mass media, according to MP Mykola Tomenko. In other voting, the Rada also adopted a law that allows the creation of an operator that will lease Ukraine’s gas transportation system (GTS) and an operator that will lease gas storage facilities (GSF) from the state. Up to 49% of the interest in the GTS and GSF operators can be sold to the companies controlled by EU or U.S. residents. For the GTS operator, potential buyers should be already certified as GTS operators according to EU rules. The lists of candidates for such operators and the results of the privatization tenders should be approved by the Rada, according to the legislation. Alexander Paraschiy: Recall that last week, the Cabinet drafted a list of 172 individuals and 65 organizations against which the sanctions might be imposed. The core question that is being discussed globally is whether Gazprom will be sanctioned. If so, this might result in ban of providing gas transit services to Gazprom via Ukrainian territory. Such a move might have important consequences for all EU-based consumers of Russian gas. At the moment, it’s impossible to estimate how high are the chances of this sanction being imposed. The law on GTS operator privatization has been lobbied by Naftogaz. By selling a stake in the GTS operator, Naftogaz hopes to attract large EU-based operators into the modernization of Ukraine’s GTS. On top of that, Naftogaz believes that the EU operators’ participation in the GTS will force them to think about maximizing the GTS's profit, e.g. by preferring to invest in Ukraine’s route for transporting Russian gas to the EU instead of alternative projects like South Stream. The reasoning looks logical – we will see how well these ideas will be implemented.