Second Kyiv Security Forum Digest

a platform for European
security architecture
BLACK-CASPIAN
SEA REGION AND EUROPEAN
ENERGY SECURITY
November 6-7, 2008

FROM THE FOUNDER OF OPEN UKRAINE FOUNDATION
Arseniy YATSENYUK,
Ex-Speaker of the Parliament of Ukraine,
Founder of Open Ukraine Foundation
Dear Friends!
...In recent times, energy ceased to be a commodity, it became an element
of external policy. One of the greatest challenges of the world has been
the so-called energy independence. Energy independence is nothing but
a myth. All participants in the energy market are extremely dependent on
each other. …In this vicious circle we should develop an energy policy
that we lack today.
…When the price of oil reached a critical level of $148 per barrel, it de-
creased to $60. I am sure that this price is a short-term phenomenon, and
2 SECOND KYIV SECURITY FORUM

during the second half of the year 2009, the price of oil will be about $100. During this period we
should act. We have the best chance for energy dependent countries to develop their energy policy
and make a constructive decision on what their and the world energy policy should be like.
…After the financial crisis and after the significant drop of energy carriers’ prices, all transport
projects were frozen. If they were not frozen publicly, they were frozen in an unofficial way. This will
lead us to an inability to diversify energy supply sources, continuing dependence on the traditional
suppliers and correspondent risks related to exploitation of the old transport corridors. …Because
of the price situation on the external market, there is no sense, from an economic point of view, to
develop any alternative or renewable energy sources when the price of oil is $60. It means that in
a short-term perspective, we will face more problems: if the price of oil increases, and it is sure to
increase, we will face the problems of dependence exceptionally on traditional energy sources. …
The situation with oil production is not so bright. ….sooner or later the world will face the problem
of scarce energy resources. In its turn, it means that in the future there will be a dictatorship by
some monopolist countries again, and we should start preparing for it already today.
It is very important to ensure global security on the energy level. …The number one priority for
the WTO should be elaborating energy rules to be followed by everybody. The Energy Charter is a
very good document, but, unfortunately, it is mostly a declarative document not covering the main
producer, transit and consumer countries. That is why working out energy market rules within WTO
frameworks is a priority task for ensuring energy security. …We should also improve the Energy
Charter by developing effective controlling and fulfilling mechanisms, by involving all the countries
working on the energy market and enjoying their monopoly in one or another sphere into participa-
tion and ratification of this Treaty.
With regard to the European Union, unfortunately, the so-called Common Policy of the EU in the
energy field has not been established yet. But we hope that when the Lisbon Treaty is ratified and
when all the mechanisms of internal cooperation within the EU are installed, Europe will form its
Common Energy Policy, and Europe will have clear approaches stipulating Ukraine’s active participa-
tion in the European energy policy.
Today Ukraine has a very good chance to be not only a transit country but also a country that
actively participates in different investment projects. Such projects should provide for EU’s, Rus-
sia’s, Turkmenistan’s, Uzbekistan’s and Kazakhstan’s participation. All the process participants may
achieve success only in unity… On Ukraine’s energy market, a lot has been done in the recent pe-
riod. I would like to stress that it is necessary to revive the energy monopoly of Naftogas of Ukraine.
We need direct contracts, direct relations with suppliers and consumers. Ukraine also needs a clear,
independent and efficient energy regulator setting rules on electrical energy, gas and oil markets.
…Two years ago Ukraine occupied the first place in the world by energy consumption level. In such
a situation, regardless of the price of energy resources, we will not be able to survive. That is why
the issue of energy efficiency, reducing the energy consumption level, is the priority task for the
Ukrainian state as a whole.
Thank you for your attention. I invite everybody to the discussion!
SECOND KYIV SECURITY FORUM 3

FORUM AGENDA
DAY 1 – THURSDAY, NOVEMBER 6, 2008
Venue: Diplomatic Academy of Ukraine, 2 Velyka Zhytomyrska Street
(Conference hall, 2nd floor)
15:00–16:00 Participant registration and press accreditation
16:00–19:00 Forum opening:
COMMON CHALLENGES FOR ENERGY SECURITY IN WIDER EUROPE
16:00–16:10 Forum welcome:
Arseniy YATSENIUK, Speaker of the Parliament of Ukraine
16:10 – 18:15 Presentations:

Hryhoriy NEMYRIA, Vi ce- Prime- Mini ster for Europ ean and
International Integration, Ukraine
Welcome to Forum participants on behalf of Helga SCHMID, Director, Policy
Unit, Council of the European Union, General Secretariat
Vladimir RAKHMANIN, Deputy Secretary General, Energy Charter Secretariat
Mariam VALISHVILI, First Deputy Minister of Energy, Georgia
Vytautas NAUDUZAS, Vice-Minister of Economy, Republic of Lithuania
Jacek KLUCZKOWSKI, Ambassador Extraordinary and Plenipotentiary of the
Republic of Poland to Ukraine
William TAILOR, Ambassador Extraordinary and Plenipotentiary of the USA
to Ukraine
18:15 – 18:45 Question and answer session
19:00 – 21:00 Forum Reception at Hyatt Hotel
Day 2 – Friday, NOVEMBER 7, 2008
Venue: Hotel “Rus”, 4 Hospitalna Street (Conference Hall, 1st floor)
8:30–9:00 Participant registration and press accreditation
9:00 – 11:00 Plenary Session I
ARE THERE COMMON PRIORITIES FOR THE EUROPEAN UNION AND
BLACK-CASPIAN SEA REGION TO ENSURE ENERGY SECURITY?
Moderator: Christof van AGT, Eurasian Oil & Gas Independent Advisor
Suggested topics:
· Does Common European Energy Policy work?
· Efficiency of the Energy Charter – current situation and projection for
the future

Volodymyr MAKUKHA, Deputy Minister of Fuel and Energy, Ukraine
Faouzi BENSARSA, Adviser for energy issues, Directorate-General for
External Relations of EC, and for the Commissioner for External Relations
Ursula GACEK, Member of the European Parliament from Poland
Altai EFENDIYEV, Deputy Secretary General, BSEC
Sabukhi TEMIROV, Deputy Secretary General, Organization for Democracy
and Economic Development GUAM
Pavlo SULTANSKYI, Director, Economic Cooperation Department, MFA of Ukraine
Discussants:
Stephan de SPIEGELEIRE, Senior Researcher, the Hague Center for Strate-
gic Studies, the Netherlands
Ingolf KIESOW, Ambassador and Senior Research Fellow, Research Director,
Institute for Security and Development Policy, Central Asia-Caucasus Insti-
tute and Silk Road Studies Program, Stockholm, Sweden
10:00 – 11:00 Discussion
11:00 – 11:30 Coffee Break
11:30 – 13:30 Plenary Session II
NATIONAL ENERGY STRATEGIES VS. REGIONAL SYNERGIES
Moderator: John ROBERTS, Informational Service PLATTS, UK
Suggested topics
· Adjustment of national governments’ policies, incentives and projects in
the context of achievement of Common European energy policy
· How political dynamics affect business rationale for new energy projects
· Energy security – a complementary role for NATO and the EU
· Energy dependency –driving force for decision making?
· Evaluating existing regional cooperation projects
Friedemann MULLER, Non-residential Senior Researcher, German Institute
for International and Security Affairs, Germany
Michael GAUL, Deputy Director of the Defense and Security Economics Di-
rectorate, Political Affairs and Security Policy Division, NATO Headquarters
in Brussels
Bohdan SOKOLOVSKYI, Special Representative of President of Ukraine for
International Energy Security Issues, Ukraine
Margarita BALMACEDA, Associate Professor, John C. Whitehead School of
Diplomacy and International Relations, Seton Hall University and Associ-
ate, Ukrainian Research Institute, Harvard University, USA

FORUM AGENDA
Discussants:
Andrew MONAGHAN, Research Advisor, Research Division, NATO Defense College
Serhiy KORSUNSKYI, Ambassador Extraordinary and Plenipotentiary of
Ukraine to Turkey

13:30 – 15:00 Lunch (Restaurant of hotel “Rus”, Hall “Ruskyi”, 2nd floor)
15:00 – 16:30 TWO PARALLEL WORKSHOPS
Workshop 1 (section “A”):
BUSINESS DECISIONS AND CORPORATE INTERESTS VS. ENERGY SECURITY
AND REGIONAL SYNERGIES
Moderator: Ihor MITYUKOV, General Director, Institute of Financial Policy; Country
Head of Morgan Stanley Office in Ukraine
Suggested topics
· Oil and Gas trade – bone of contention or chance for cooperation?
· Inter-governmental arrangements/ business projects/ vertical schemes?
· Transparency of the energy market
· Political instability vs. predictability of arrangements
15:00 – 16:30 Presentations and discussion:

Boris NEMTSOV, Member of the Federal Political Council of the political
party SPS, Russian Federation
Patrick van DAELE, General Manager, Shell Ukraine Exploration and Production
Levent ÖZGÜL, BOTAŞ (Turkish Petroleum Pipeline Corporation), Strategy
& Business Development Manager, Turkey
Simon PIRANI, Senior Research Fellow, Oxford Institute for Energy Studies, UK
Giorgi VASHAKMADZE, Director, Corporate Development, GUEU White Stream
15:00 – 16:30 Workshop 2 (section “F”):

ALTERNATIVE ENERGY SOURCES AND ENERGY EFFICIENCY – INCREASED
ENERGY SECURITY?
Moderator: Oleksandr TODIYCHUK, President of Q-Club, Head, Energy and Energy
Efficiency Department, MIM-Kyiv
Suggested topics:
· Research and Development – examples of investments in alternative
energy sources
· Energy efficiency and saving technologies
· Energy efficiency and food deficit

15:00 – 16:30 Presentations and discussion:
Kevin ROSNER, Senior Fellow, Institute for the Analysis of Global Security, USA
Valeriy BOROVYK, Chairman of the Board, Alliance “New Energy of
Ukraine”, Ukraine
Heikki LEHTIMAKI, Managing Director, Plan Energy Ltd, Finland
Discussant:
Inigo ARENCIBIA GONZALEZ, Project Manager, Central
and Eastern Europe PEP - Energy Efficiency, International Finance
Corporation
16:30 – 17:00 Coffee Break

17:00 – 18:30 Plenary Session III
WAYS TO IMPROVE RELATIONS BETWEEN PRODUCERS, TRANSIT AND
CONSUMER COUNTRIES OF ENERGY FOR STRONGER EUROPEAN ENERGY
SECURITY
Moderator: Sabine FISCHER, The European Union Institute for Security Studies, Re-
search Fellow

Mikhail KRUTIKHIN, Russian Energy Bulletin, Editor, Russia
James SHERR, Head, Russia and Eurasia Programme, The Royal Institute of
International Affairs Chatham House, United Kingdom
Mykhailo HONCHAR, Director of Energy Programs, NOMOS Center, Ukraine
Discussants:
Oleksandr NARBUT, Independent Expert, Ukraine
Tim GOULD, Programme Manager - Caspian, Caucasus, Southeast Europe, Office
for Global Energy Dialogue, International Energy Agency

17:00 – 17:50 Closing remarks:
Arseniy YATSENIUK, Speaker of the Parliament of Ukraine
19:00 – 21:00 Closing Reception at Restaurant “Opanas”

EXPERT FOCUS
"...DO NOT BYPASS UKRAINE. Yes, there are issues with
transparency and inefficiency within Ukraine but it
needs to more effectively integrate itself within the Eu-
ropean energy infrastructure system. Bypassing Ukraine
will make it much harder for Ukraine to reform. Greater
diversity in energy supply and increased transparency in
all of Europe’s energy contracts and policies is the only
way that Europe can begin to end this age of energy in-
security. I think that these priorities should become an
integral part of a more ambitious transatlantic transpar-
ency initiative as an element of renewed updated trans-
atlantic agenda..."
Hryhoriy NEMYRIA,
Vice Prime Minister for
European and Internation-
al Integration, Ukraine
"...IT IS FITTING that this Forum takes place in Ukraine,

which is a neighbor of strategic importance for the Euro-
pean Union, and key partner in the region. Ukraine's role in
the development of our shared continent cannot be overes-
timated. Its future affects our common future. I very much
welcome Ukraine's leadership in addressing our shared chal-
lenge of energy security..."
"...A VERY important part of this work within the European
Union will be the proper integration of the most isolated
European countries into European electricity and gas grids.
Looking to its partners, the European Union is committed
to accelerating the development of relations with producer
and transit countries, to secure the stability of supply and
diversifying energy sources and supply routes. We wish to Welcome to Forum par-
see the European Energy Community extended to include ticipants on behalf of
Moldova, Turkey and Ukraine so that the European Union en- Helga SCHMID, Director,
ergy acquis applies across our neighborhood. This will bring
transparency, and better regulated markets. This is in our in- Policy Unit, Council of the
terests and in our partners' interests. Accelerating regional European Union, General
co-operation is crucial in this context..." Secretariat
Full texts of presentations are available at: http://www.openukraine.org/en/programs/dialogue/security-forum/08/

"...MEETING policy goals in relation to energy security
requires recognition of our interdependence in matters
of energy, and the understanding that genuine security
and stability need to be based on mutual benefits and
advantages all along the energy value chain. I would like
to underline the importance of an inclusive debate in-
volving all participants in the energy value chain - the
producers, the consumers, the transit countries. Given
the global distribution of energy resources, current
technologies and projections of demand, the priority for
policy makers should be on how to manage interdepen-
dence most effectively; and how to create functioning
and balanced international frameworks that can mitigate
the associated risks. ... The main task for governments Vladimir RAKHMANIN,
must be to ensure the operation of international market Deputy Secretary General,
mechanisms by putting in place predictable, transpar- Energy Charter Secretariat
ent and non-discriminatory conditions for trade and in-
vestment. More broadly, governments have to create an
environment that will allow the right mix of new energy
technologies to emerge for use of fossil fuels, alternative
energy sources..."
"...IN ADDITION to the efforts of national governments,
an interdependent energy world needs international
institutions to promote coordination and to provide a
stable framework for cooperation. This is precisely why
we see that the Energy Charter Treaty occupies such a
valuable and distinctive place in the international legal
architecture..."
"...LOW PRICES, if permanent, will jeopardize some ex-
isting investments, and can put a hold on planned ma-
jor ones. These investments nevertheless are absolutely
necessary for the decades to come. Their cancellation or
even postponement will endanger the security of sup-
ply and in consequence the economy as a whole. In this
gloomy context, long-term decisions in the energy sec-
tor need assurances that contracts and property will be
respected..."
NOVEMBER 6, 2008 SECOND KYIV SECURITY FORUM 9

EXPERT FOCUS
"...THIS FORUM justly serves as an illustration to an apparent

fact that Energy is a key area of cooperation in the backdrop of
the 21st century within which the world’s economic regions are
interdependent for ensuring security and stable economic con-
ditions. Indeed, we speak about stability and sustainability, and
to us, Georgians, these words, for the duration of recent months,
have grown in their meaning and value even more..."
"...WITH the current world economic crisis, it becomes more
obvious that Russia as a dominant supplier is less likely to fill
future European demand due to the lack of domestic invest-
ment in new energy projects and infrastructure. The EU needs
to develop an active strategy for securing access to the energy
resources of the Caspian region, and handling existing competi-
Mariam VALISHVILI, tion for these..."
First Deputy Minister of "...AS FOR THE POLITICAL REALM – the EU should speak with a
Energy, Georgia single, consolidated voice to show support to the states of the
Black Sea and Caspian Sea Basins. Their adherence to Western
principles and their overall economic and political stability are
crucial for the sustainable future of the whole continent. Diver-
sified hydrocarbon supply sources and diverse supply routes of
transportation simply serve as a vehicle to achieve this goal..."
"...IT IS CLEAR that in the long run the gap of demand and
supply of energy resources will increase globally, consequently,
the prices on energy resources should increase as well. Addi-
tionally, taking into account financial crisis, climate change,
impending food crisis, we are getting a very dark picture. Are
we able to avoid such a situation? The best reply was made by
Winston Churchill: “An optimist sees the opportunity in every
difficulty.” Is energy independence of Ukraine or the EU a good
opportunity? To my mind, it is nothing but just a nice illusion.
No country, including Russia, is energy independent. Russia, for
example, needs to get technology and equipment for the oil and
gas sector. Energy suppliers and energy consumers are highly
interrelated, and if we have a hole in the ship we are sinking
together...."
Vytautas NAUDUZAS,
"...THE BEST SCENARIO for improving energy security is the Minister of Economy,
Common EU energy policy. The EU should speak with a single
voice. The Common EU energy policy is not a front line, is not Republic of Lithuania
against Russia or other countries. If energy suppliers are united
in OPEC, why is the EU unable to buy gas collectively? Today the
EU Common energy policy is still weak. For a very simple reason
– because the EU is still weak in the energy sector. We could
strengthen energy security with transatlantic co-operation, …
even though there are a lot of skeptics about the efficiency of
transatlantic cooperation on energy matters..."

"...THE KRAKOW Initiative is additional evidence of the joint
contribution of Poland and Ukraine to the energy security of our
continent. During our common work we have transformed the
idea into the practically completed concept of a common en-
ergy corridor. We have agreed upon the next steps that should be
made within the framework of implementation of Summit resolu-
tions. First of all, we have established an organization, a joint
company (Poland, Ukraine, Azerbaijan, Georgia and Lithuania),
which coordinates and projects actions of our governments and
our national oil-transporting organizations, as well as prepares
the legislative and juridical bases for this project. Secondly, af-
ter the Kyiv Summit, President Yushchenko enacted a Decree on
the termination of reverse oil delivery from Brody to Odesa, which
meant that we would come back to the plans made in coopera-
tion with Ukraine at the end of the ‘90s. In other words, this part Jacek KLUCZKOWSKI,
of the oil pipeline (from Odesa to Brody) should have been part Ambassador Extraordinary
of the Trans-European Oil Pipeline from the Black to the Baltic and Plenipotentiary of
Sea. Unfortunately, for unknown reasons, the Decree has not been
fulfilled yet. Nevertheless, I hope that we will see some positive the Republic of Poland to
changes in this area soon..." Ukraine
"...UKRAINE and Poland have more common interests than dif-
ferences. In spite of the different level of reform implementation
and transformation of the energy systems in our states, Poland
and Ukraine face similar challenges in the energy field. Moreover,
both countries similarly define their tasks in this area; both coun-
tries are interested in effective cooperation for enhancing energy
security. We will fight together against attempts of using energy
as a weapon against us by any country..."
"...UKRAINE currently relies on one supplier for the
majority of international gas and oil and nuclear fuel.
Nearly total dependency on energy from one source clearly
threatens Ukraine’s energy security. Today Ukraine has
taken a couple of steps in diversifying its energy suppli-
ers, increasing transparency in the sector, attracting much
needed foreign investment, and developing alternative
energy sources. But 17 years after independence, the en-
ergy economy of Ukraine is still frozen in elements of the
Soviet time..."
"...THERE are people in this room who have told us that
the resources in the Black Sea are comparable to the Cas-
pian Sea. But they have not been developed. Significant
William TAYLOR, improvement in the business climate is required to attract
Ambassador Extraordinary the investment of billions of dollars needed from interna-
tional energy companies for serious development. Ukrai-
and Plenipotentiary of the nian energy legislation and regulation will need to be up-
USA to Ukraine dated to correspond with norms found elsewhere around

EXPERT FOCUS
the Globe. The updated system will need to provide for fair
access to geological data, for transparent decision-making
processes, for longer licensing periods, the use of model
contracts, and truly competitive tenders. … If Ukraine
decides to proceed with these reforms, the picture gets
brighter. There is boundless potential for improvement
in Ukraine’s position. Friendly governments and interna-
tional institutions can help with capacity building for ef-
fective policies’ execution..."
"...THE POLITICAL will for energy reform is in place. Not
only Ukraine would be helping itself but also through en-
ergy sector reform it would be making arguably the single
and the most important contribution that Ukraine can
make to the security of Europe..."
"...MAxIMUM possible integration of Ukraine’s energy

system into the European energy system is the key task
for today. … Implementation of projects aimed at in-
creasing transit capacity of the existing and construct-
ing new gas and oil pipelines over the territory of Ukraine
requires less financial resources than development of
new transit routes by-passing Ukraine..."
"...WE BELIEVE that the Energy Charter today is a unique
international multilateral legally-binding agreement in the
energy field, which determines multilaterally-agreed rules of
regulation of investments, trade, transit, energy efficiency
and clinching of arguments. It is important that the Agree-
ment unites 51 countries and substitutes for a great num- Volodymyr MAKUKHA,
ber of bilateral agreements that should have been reached
without it. Ukraine works actively and is ready to continue
Deputy Minister of Fuel
its activities towards reaching the main goal of the Energy and Energy, Ukraine
Charter Agreement, which is ensuring transparency and
efficiency of energy markets. We hope that implementing
ECA principles will lessen the risks for all the energy chain
participants – producer, transit and consumer countries
– and will contribute to involving foreign investments in
the energy area. Joining the Energy Charter Agreement by
the Russian Federation would also immensely contribute
to reaching the Agreement’s goals. RF’s ratification of this
document would obviously strengthen free competition in
production and transit areas, would improve access to tran-
sit networks, and would lessen transit risks..."

I do not have any indication that the change of administrations (in
Russia or the USA) will de-politicize the energy market. Signals are
that energy security will become a huge political instrument in the
commonwealth. The question of the future is different from the one
in the past. You have the question of resurgence of national authori-
ties, you have the question of less intervention of the private sector in
the development of the resources, you have the terrific challenge of
climate change, and you have the tremendous question of the increas-
ing demand. In all this challenge, acting on a bilateral level will not
be enough. So, acting on a bilateral level, acting on a regional level
and acting on a multilateral level – it is essential to coordinate all
of these.
"...ALSO a key issue now which we have to face is our com-

mon solidarity. I insist very much on solidarity. As you know,
in the EU, our Heads of States have moved a step forward by
Faouzi BENSARSA, having the EU solidarity mechanism included in the Lisbon
Adviser for energy issues, Treaty. The Lisbon Treaty will need to be applied for having
Directorate General for a “family”-solidarity mechanism within the EU. And today
what we are saying is that this solidarity mechanism should
External Relations of the also be open, I believe, to our neighbors from the East, and
European Commission, and in particular, to Eastern Europe and South Caucasus..."
for the Commissioner for
External Relations
"...LET us make no mistake that undermining Georgia’s
credibility as an energy transit country was high on the
agenda this August. It may have been about NATO mem-
bership, it may have been about flexing muscles, it may
have been about spheres of influence, but the energy
transit issue was high on that agenda. And currently
there is pressure to acknowledge that the Sarkozi-bro-
kered cease-fire agreement has been adhered to by the
Russians. At best we cannot verify because our observers
do not have access to the whole of Georgia and I think
many have doubts. So, we have not seen as strong and as
united a response to Georgia as we would have liked..."
"...IF BY ACHIEVING A Common energy policy, we expect Ursula GACEK,
the EU to speak with one voice on Russian energy issues, I
am afraid that’s not going to happen. There are too many
Member of the European
particular interests. And even the Lisbon Treaty with its Parliament from Poland
solidarity clause still does not deny member states of their
sovereign right to decide on their energy mix, suppliers and
routes. That is not the right that member states will sur-
render. So, if this is the way that we define Common energy
policy, we may have problems..."
"...THE EU MAY not be the perfect way of achieving energy
security, but it’s the best we have..."

EXPERT FOCUS
"...THE BLACK SEA AREA is a natural bridge between en-

ergy deficit/consuming regions and energy rich/producing
regions; it provides access to new alternative sources of en-
ergy; and for over a decade is the largest energy infrastruc-
ture development area (over 20 new projects realized, under
implementation or in projection). The area also has become
the theater of fierce competition for control over sources
of supply and transport routes; moreover, existing conflicts
and political tensions impede comprehensive cooperation
in energy..."
"...THE BLACK SEA REGION is challenged by the neces-
sity to develop a comprehensive formula for energy secu-
rity for the Wider Black Sea area; by the need to shape the
Wider Black Sea area of growing geo-strategic importance Altai EFENDIYEV,
as a stable, cohesive region; and by the internal require- Deputy Secretary General,
ment to develop multilateral mechanisms of cooperation Organization of Black Sea
in the field. There are common priorities for the EU and
Black-Caspian Sea region to ensure energy security. What Economic Cooperation
is needed is a common, consistent and pro-active EU en-
ergy policy towards the region; engagement of all stake-
holders in the process; and acknowledgement and active
involvement of BSEC as a partner in the process, since it is
a regional framework and platform for a dialogue and con-
sequently an instrument of regional policies in energy..."
"...WE HAVE BEEN talking about the danger of using oil as
a weapon, but we also have to consider the problem of us-
ing weapons for getting oil and gas. I think that in order to
achieve on a global scale a wider reach, a real global reach of
the basic principles of the Energy Charter, there will have to
be made some compromises for the new desperate countries
like India and China, giving them some more room in the
field-hunting in some way. And there will have to be nego-
tiations but we have not even talked about the negotiating
on the international level of this problem. And I think it is
high time to do that exactly..."
Ingolf KIESOW,
Ambassador and Senior Research
Fellow, Research Director, Insti-
tute for Security and Development
Policy, Central Asia-Caucasus Insti-
tute and Silk Road Studies Program,
Stockholm, Sweden
"...WE ARE FACING complicated international relations
and new challenges that were unknown to mankind be-
fore. The challenges need quick reaction via establish-
ing new global structures and involving global resources
for overcoming these difficulties. We have neither global
structures, nor global resources. Insecurity will be deep-
ening because of the breakdown of the existing system
of international relations. The old international rela-
tions system still functions, however, it needs to be fun-
damentally modernized or its basic principles have to be
changed..."
"...NATIONALIZATION of the energy resources by the
producer-states and technological egoism of the con-
Pavlo SULTANSKYI, sumer countries are casting doubts on production growth
Director, Economic Co- and unobstructed transit of energy resources. The third
operation Department, constituent which is a transit constituent cannot exist
without the two mentioned components, and as a result,
Ministry of Forgeign the transit countries including Ukraine will suffer dam-
Affairs of Ukraine ages. …Resource nationalism leads to transformation of
national governments’ relations with international com-
panies operating on producer countries’ territories; tech-
nological egoism does not solve the problem of secure
energy supply. Thus, both tendencies will worsen the ex-
istent world problems, establishing additional barriers for
business development in energy field and decreasing the
states’ energy security level..."
"...THE ADVANTAGEOUS geographic position of the GUAM

countries forming a natural bridge between Europe and the rich
in energy resources countries of Central Asia and the Caspian
region is one of the main conditions for development of energy
transportation corridors and corresponding infrastructures..."
"...WE HOPE that cooperation in the energy area in the
“GUAM+…” format will be reinforced. We are undertaking the
necessary steps for that. For example, the last meeting of the
GUAM working group on energy issues that took place in spring
in Tbilisi was also attended by Japanese representatives inter-
ested in cooperation with GUAM in the energy area..."
Sabukhi TEMIROV,
Deputy Secretary General,
Organization for Democ-
racy and Economic Devel-
opment GUAM
EXPERT FOCUS
"...EUROPE’S SECURITY of the supply of oil and natural

gas is sensitive and of major interest to potential suppli-
ers. There are not too many of them and it is important
to know whether these exporters link political interests
with the economic interest of optimizing trade revenues.
It is no question that the main supplier to Europe of oil
and natural gas, Russia, has a political agenda linked to
its oil and natural gas exports. .....Most experts say that,
considering this situation, Europe has to speak with one
voice in order to be a strong advocate of the common
European interest of a secure energy supply. However,
different national interests of European states make it
difficult to formulate a common European energy policy,
Friedemann MULLER, but in spite of the national differences of interests with-
in Europe it is obvious that the common interests should
Non-residential Senior be made use of to design a common policy..."
Researcher, German Insti-
tute for International and
"...IF RUSSIA cuts the natural gas supply for a week
it creates panic on the consumer side. If the consumer
Security Affairs, Germany countries don’t pay their bill for a week it will hardly find
any public attention on the Russian side. This asymme-
try gives Russia the opportunity to play with the weapon
of European dependence as it did during the negotia-
tions with the EU on Russia’s WTO membership. The de-
pendence is extremely strong due to the fact that infra-
structure does not allow to ship natural gas to East and
Central European countries in case of a Russian delivery
stop even if suppliers, for instance from North Africa or
the Middle East, would provide the necessary amount of
natural gas..."
"...WE NEED a very different European approach with re-
gard to the two most important energy carriers – oil and
natural gas. Since we know that oil will never become a
product of a free and fair competitive market again and
the limited remaining reserves will be more needed by
states who don’t have the technologies for alternatives
to oil, the European states, like North America, should
make a major effort to speed up the transition from the
oil age to the post-oil age..."
"...IF we don’t start to think about the management of
the transition period into the post-oil age we might get
increasing distribution conflicts and a further power shift
from the major consumer to the producer regions..."

"...WITH REGARD to natural gas we have to make any
effort to improve the transport infrastructure which
allows to have alternatives to the current very limited
supply infrastructure from outside Europe to Europe. We
also need an infrastructure within Europe which allows
the transportation of natural gas from where it is avail-
able to where it is needed. The current infrastructure
is far from this. Moreover, the world’s most natural gas
rich region between the Caspian Sea and the Persian
Gulf has to get access to the world’s largest natural gas
import market, which is Europe. This is good for compe-
tition and thus for lower prices but also for the security
of supply..."
"..THERE are two major threats to the energy security

of Ukraine – internal and external. The external threat
involves the fact that Ukraine has a large quantity of gas
which is delivered by one supplier..."
"...AN URGENT problem for Ukraine is the internal
threat – the energy is used irrationally: each consumer
in Ukraine on the average uses more energy than you can
expect in a country with such level of industrialization.
Furthermore, Ukraine spends huge sums of money to im-
port gas from Russia, though there is no need to use such
a large quantity of gas..."
"...TWO YEARS AGO, in 2006, the European Commission-
John ROBERTS, er on Trade stated that the EU is not seriously concerned
Informational Service with relationships between Russia and its neighbours on
the gas price issue. The point is that Europe should get
PLATTS, UK gas without interruption. Europe’s position has changed
since then. These two positions are correct irrespective
of each other. First, Russia really has been a reliable sup-
plier for the main consumer countries of Western Europe
since the 1970s. At the same time, one cannot name it a
reliable supplier for post-Soviet countries and those in-
fluenced by the USSR. After EU enlargement and the en-
try of East European countries, we found ourselves in the
same ship. Russia’s reliability for some does not preclude
its unreliability for others. The policy has to be consis-
tent. That is why the EU as a whole and its member-states
separately are watching Russia’s steps regarding the in-
terruption of supplies for post-Soviet republics more at-
tentively than earlier..."

EXPERT FOCUS
"...WHEN you strip all the official presentations that

we’ve heard from the diplomatic niceties, you still see
that the underlining consensus is quite fragile: I mean
the divergent priorities, there are very few common
priorities. So, you get a pretty dim view of the security
and energy problem; we get the idea that there should
be institutional solutions to the problem. The economic
crisis is pushing us into what some are calling a grim new
deal, whereby governments all across the world are all of
a sudden grasping the opportunity to come up with new
novel solutions..."
"...I DISAGREE with both of these premises. From my
point of view, the energy security of Europe, of Western
Stephan de SPIEGELEIRE, Europe has hardly been as bright as it is turning out to be
Senior Researcher, the today. And I also don’t think that institutional solutions
Hague Center for Strategic are going to get us out of it..."
Studies, the Netherlands "...THE ECONOMIC crisis is pushing us into what some
are calling a grim new deal, whereby governments all
across the world are all of a sudden grasping the oppor-
tunity to come up with new novel solutions..."
"...SO, all of a sudden, the policy focus that comes with
the financial economic crisis, I think is making the likely
sort of solutions much better, contrary to what we have
heard today. And it’s not an institutional one; it’s the
sort of a bottom-up one..."
"...I THINK policy-makers tend to underestimate the
incredible accelerating pace of changing technology,
which will make a lot of discussions we have today obso-
lete in a relatively short period of time..."
"...IT SEEMS to me that the Energy Charter is useful
for those countries who want to play ball. I personally
still question why we need so many sector-specific rules
of the game, and why we could not have encompassed
these in the broader frameworks. I do not think right
now it helps us with some of the issues for the coun-
tries who don’t want to play ball. So, I do not necessarily
agree with the sort of 10 years of the consensus that has
emerged so far..."

"...INSTEAD of energy interdependency, you can also
say it is a kind of mutual vulnerability between produc-
ers, transit countries and consumers..."
"...ENERGY security is a global issue with strong regional
characteristics. Therefore, international organizations
have a role to play either as regulator, facilitator, or as
security providers. NATO as a political military organiza-
tion has specific tools that can be used in promoting and
contributing to energy security in a comprehensive way.
NATO compliments the other international organizations’
efforts in this field. NATO has no ambitions to take over
these activities that the EU has in its portfolio. But NATO
has other means and other ways to deal with this area..." Michael GAUL,
"...ENERGY security is not more and not less than the Deputy Director of the De-
provision of an adequate, affordable, reliable, timely,
clean and uninterrupted energy supply. Energy security
fense and Security Econom-
is of global concern and therefore we do this kind of co- ics Directorate, Political
operation to address this area in a comprehensive way. Affairs and Security Policy
And it was mentioned before, energy security forces us
to work together and there is a certain opportunity for
Division, NATO Headquar-
solving frozen conflicts, for bringing peace and stability ters in Brussels
through cooperation..."
"...THE NOTION of producer, consumer and transit states

is also misleading. In fact, every state can start thinking
at least in two of these roles, if not all three. We have to
try to consider that major producers are also major transit
states, are also producers and consumers themselves. This
has a fundamental impact on our relations with them. If
producer states run short of gas because they cannot con-
sume efficiently or produce enough, we also have prob-
lems. We need to share technology in this respect..."
"...Diversification is a nice handy word for people to use
and they like to use “we must diversify”, - full stop, and a
new paragraph. … In many cases the call to diversify is
not backed up with significant enough relations with the
Andrew MONAGHAN, states to whom we intend to diversify. However difficult
the relations are with other states in this partnership,
Research Advisor, Research this is always a dialogue. We have to engage, we cannot
Division, NATO Defense simply discuss energy without Russia or without Saudi
College Arabia for instance. We have to engage with all of them
for a strategic horizon..."

EXPERT FOCUS
"...WE SUGGEST development of new additional mecha-

nisms within the framework of the new informal com-
munity stemming from the Krakow Initiative. Dialogue
among the participants of the initiative is taking place on
the highest political, governmental, business and scien-
tific level. De-facto, we reached cooperation synergy. We
have regular meetings of experts, governmental officials
and presidents discussing the most important issues, tak-
ing decisions that are to be fulfilled in accordance with
norms and procedures of participating states, taking into
account international obligations of every state as well.
So, within the framework of the Krakow Initiative, the
Caspian-Black Sea-Baltic Energy Transit Space has been
Bohdan SOKOLOVSKYI, established. Within the framework of this initiative, the
first cooperation forms have been developed enabling
Special Representative of us to discuss options for improving the existent instru-
the President of Ukraine for ments and using new instruments..."
International Energy "...For example, Ukraine suggested joint use and de-
Security Issues, Ukraine velopment of the meteorological center which is being
developed in Ukraine for some years with the European
Commission’s support. The center can be used for ensur-
ing qualitative and quantitative control over transit of
energy carriers in real time and a real mode..."
"...THE NExT project which we suggest for implementa-
tion is targeted at developing a common, absolutely open
logistic center that would ensure control over transit of
energy carriers and provide for a quick decision-making
process on each stage of the transporting corridors.
...One more mechanism is development of a joint struc-
ture that would ensure quick reaction to challenges, dan-
ger or accidents that may happen in any part of the oil or
gas pipeline..."

"...IT HAS BEEN argued that given the general atmo-
sphere of lack of transparency, some would say corrup-
tion, in energy trading of the former Soviet Union, the
role of non-transparent intermediary companies was an
informal means of redistribution of energy runs, and has
been one of the only means available to maintain rela-
tively low prices. So, what is wrong with this picture? First
of all, the myth that the intermediary companies are the
only way to maintain low prices has been used to pressure
Ukraine. Yes, intermediary companies may offer softening
of prices, but at what price? The energy subsidization im-
plied in the business models used by intermediary com-
panies on the conditions like the one we see in this area
Margarita BALMACEDA, are not really free subsidies coming from Russia or from
Turkmenistan or out of air, but forced subsidies coming
Associate Professor, John from both Russian and Ukrainian state budgets or Central
C. Whitehead School of Asia’s state budgets indirectly from future generations
Diplomacy and Interna- as the hidden cost of subsidies that surface later in the
form of budget deficit inflation and increase in foreign
tional Relations, Seton Hall indebtedness. The second problem with this is that all
University, USA of this happens exactly at the same time as the Russian
side is intensifying its attempts to act as monopolist in
buying Central Asian energy, seeking to buy the entirely
available gas production in countries like Turkmenistan,
Kazakhstan and Uzbekistan...."
"...Diversification will not come cheaply to Ukraine.
There is too much in terms of legacies, and too much in
terms of high cost of diversifying pipeline structures.
And here, the actual quality of the Ukrainian political
process, the actual quality of the Ukrainian democracy
matters, because only broadly accepted energy policy has
the chance to survive and be put in practice despite the
short-term hardship involved in its implementation..."

EXPERT FOCUS
"...RUSSIA definitely has a strategy, and its strategy is

very impressive. From my point of view, it is very simple
and it includes several major points. First of all, it is to
monopolize resources; second is to monopolize routes
for their delivery; third, to block inner diversification
projects which may bring other resources rather than
Russian and Central Asian through Russia to Europe; and,
fourth, to divert attention and efforts of the internation-
al community from real problems and real projects to sur-
real ones, like South Stream, Blue Stream, North Stream
or gas OPEC. Russians are very impressive in working with
some European governments to secure markets for future
increasing of gas delivery. What instruments do we have
to counter this strategy? We have to accept it, we have Serhiy KORSUNSKYI,
to work with it, and we have to do something with it. I
agree that national strategies are very important, but on Ambassador Extraordinary
the national level we cannot work with Russians and we and Plenipotentiary of
cannot solve real energy security problems in Europe be- Ukraine to Turkey
cause this is the nature of the modern world. No one can
fight global problems alone, so we need a kind of synergy
or even synergies..."
"...I HAVE found a striking similarity with regard to
two – Ukraine and Turkey. In both cases instead of mov-
ing fast and decisively to those two countries to include
them into the European energy area, to secure the ex-
isting energy transit corridor which is Ukraine and the
future key transit corridor for energy which is Turkey, the
EU, I mean Brussels, is very reluctant to move decisively
ahead and to work with both countries to bring them into
partnership which will secure European interests, and in-
terests of those countries as well..."
"...NOW GASPROM has a lot of advantages: Gasprom can act as

a corporation, Gasprom can act as a private party which can open
unlimited financing on whatever it could see as beneficial. …
So, it is using the ability to play interests against each other; and
Mr. Nemtsov raised a very interesting question about the South
Stream. Exactly, the South Stream is an instrument. It may not
be the real goal. And the real goal could be to take over Nabucco.
To control Nabucco is a much more interesting thing for Gasprom
than building South Stream, because controlling Nabucco will
mean much stronger leverages in Turkey and more surer isolation
of Caspian from Europe. …We need to understand the difference
between the goal and the instruments. And the goal is to link Cas-
pian with Europe, to make Western companies get to the Caspian
Georgi VASHAKMADZE region, not only Turkmenistan and Azerbaijan and Kazakhstan..."

"...GASPROM really controls not only the Russian mar-
ket but the markets of its neighbors and of Central Eu-
ropean countries. Mainly this corresponds to Ukraine,
Baltic states, Belarus, and now Gasprom has huge in-
fluence in Turkey. There are also ideas to connect with
Israel and the Middle East. A lot of Gasprom custom-
ers are very nervous about the future because of two
points. First, the prices, and second, predictability of
supply. As far as prices are concerned, the most serious
situation is with Ukraine. My estimation is that finally
Ukraine will pay like Europeans pay, of course, includ-
ing transportation, etc., and this is Ukraine’s payment
for sovereignty. If you want to be an independent state,
Boris NEMTSOV, you have to pay…"
Member of the Federal "...WHAT we have in the future? Of course, all European
countries, Ukraine included, everybody needs diversifi-
Political Council of the cation. The Kremlin understands that and the Kremlin
political party SPS, Russian proceeds with an absolutely different policy, policy of
Federation monopolization and control of fields. We have some
changes inside the Russian legal system and the main
one is that only Gasprom can sell gas outside the coun-
try – this is a new chapter of Russian law. The problem
is that Gasprom is a very inefficient company. The last
9 years of gas production of gas look like stagnation (in
1990 it was about 546-549, and in 2007 – 148). If you
compare Gasprom with oil companies like Lukoil or Ros-
Neft, it is a disaster. That’s why Gasprom faces a deficit
of gas not only on the international market, but even
on the Russian market. That will be a dramatic choice
for Putin and Medvedev for the near future, because if
nothing happens in production by 2010, Russia will face
a deficit of gas of about 60 billion cubic meters..."

EXPERT FOCUS
"...THE CONVENTIONAL oil and gas resources – those

are really the more difficult hydrocarbons that we now
need to go after, producing more difficult barrels, and
that will depend on deploying new technologies, build-
ing superior capabilities and also sharing best practices.
We believe that no country and also not one company can
tackle these challenges of the future alone. That’s why
we at Shell advocate very strongly that we need to share
our knowledge, we need to work together, and we need
to bring one another to a common understanding of the
energy system. ..."
"...THIS YEAR we have painted two possible scenarios
for the world. One we call the Scramble Scenario, and the
Patrick van DAELE, second one – the Blue Print Scenario. As the words al-
ready suggest, Scramble means that this is the scenario
General Manager, Shell where countries are focusing mainly on their own short-
Ukraine Exploration and term energy security and they are putting off actions on
Production energy efficiency and CO-2. In the Blue Print scenario,
that is a model of more cooperative, collaborative effort,
where international agreements on market measures are
included that promote efficiency and reducing emis-
sions. And these scenarios we are discussing with the
governments in the countries where we operate. I think
that is fair to say that the state governments so far have
failed to agree on some of these common positions, and
it’s a little bit of a scramble at the moment..."
"...AT THE MOMENT there is only one sizable cooperation
between an international oil major (Shell) and Ukrainian
state company. We all know that the state companies are
struggling for investment, for technology, wanting to
bring global best practice to their companies. Why do I
not see more encouragement of such partnerships from
the government? ..."
"...THE ENERGY SECTOR in Ukraine is really suffering
from underinvestment and I think in order to bring that
investment it is very important that the rules of partici-
pation for companies are very clear and transparent, and
competition is encouraged rather than discouraged. As
an example, the Ukrainian domestic gas market is over-
regulated. We believe that by progressively deregulating
the market we will actually encourage that competition.
So, my other question is: when will we see the first con-
crete tangible steps towards these deregulated markets
in Ukraine?..."

"...WE ALL ExACTLY know that EU definitely demands
hundreds of bcm of additional gas for the near future, and
we all also accept policy which indicates definite source
and route diversification. Turkey, as the already intercon-
nected fourth corridor, is seated on a bridge of 150 bcm
just between Caspian, Central Asian, Russian and MENA up-
stream, and the EU downstream. ....The Nabucco project is
a main element of Turkey’s main gate for Europe. A recent
“market sounding” study indicates that there is high-level
upstream and downstream interests, therefore Nabucco is
completely feasible. ...Nabucco will be on stream in 2013,
South Stream will also be realized by 2015, and White
Stream will definitely be realized around the 2020s..."
"...WHAT is the cost of “non-available gas”? Nothing Levent OZGUL,
is simple... We have multi-billion-dollar energy and de-
fense agreements, strategic partnerships, conflicts, and
BOTAŞ (Turkish Petroleum
securing “energy routes”. Nothing will be realized with- Pipeline Corporation),
out regional and global win-win deals..." Strategy & Business Devel-
opment Manager, Turkey
"...SINCE we’ve heard many times at this Forum that
the way that Russia uses gas is in its state interest, I want
to stress that there is a very strong commercial interest. I
mean, Gasprom is not only one of the largest companies in
the world by market capitalization. It is also, even from the
government’s point of view, not only a stick with which to hit
people that the government doesn’t like, but it is also a com-
pany which pays more tax than any other in Russia. … it is
only the fact that Gasprom paid its taxes that enabled Russia
to get through the 90‘s; and it’s on the basis of those taxes
that the so-called Putin revival has partly been built..."
"...EVEN THOUGH I agree that Gasprom is inefficient in
many ways, I think that the bigger problem is the delay of in-
Simon PIRANI, vestment decision on Yamal and on Stockman. …What is cer-
Senior Research Fellow, tainly opening up is a potential gap in Russian supply, we see
that between about 2011-2012. And in the time when Yamal
Oxford Institute for Energy starts to produce considerable volumes to make up for what
Studies, UK Russia is losing by the natural decline of Western Siberia, we
see a real problem. As Mr. Nemtsov said, the Russians will sell
gas to the Europeans rather than to their own people, if they
find themselves short. I am skeptical about that. I think that
for Russia it’s extremely important to keep the Russian popu-
lation supplied with the gas. Perhaps the people who need
to worry about this gap that could appear in 2011-2012 are
those who are on annual contracts of purchases from Gasprom
which, of course, in the first place, is Ukraine..."

EXPERT FOCUS
"...DURING the Forum many discussions have been held

on how to get as much gas as possible to Ukraine and gas
transit through Ukraine. Is it really worthwhile to direct,
to use and to fight for them, - wouldn’t it be preferable
to look for change of the type of energy carrier used, or
type of energy, that is being received from gas? Shouldn’t
we make an accent on renewable sources of energy first
of all, or change over to another type of energy? Ukraine,
unfortunately, occupies one of the first places in the
world by the amount of energy used per production unit,
so accents should be changed..."
Oleksandr TODIYCHUK,
President of Q-Club; Head,
Energy and Energy Efficiency
Department, MIM-Kyiv
"...UKRAINE and its citizens have an opportunity to

forge a new energy future not based on theory, not based
on unproven technologies, but based on the individual
decision of citizens and the resolve of their national gov-
ernment. The responsibility for your future lies with you,
not with the international community, not with Russia
and not with the European Union and not with the Unit-
ed States. Moving the world off the oil in the transporta-
tion field is probably the smartest, most meaningful step
any oil importing country can take in terms of ensuring
its own energy security..."
"...IF WE ARE to cut back on our dependence on oil, then
today’s vehicle fleet must be able to accommodate alterna-
tive fuels. For a cost of approximately 100 dollars, each Kevin ROSNER,
car that comes out from the production line in Detroit can Senior Fellow, Institute for
be made into a flexible fuel vehicle, which can essentially
run on any combination of gasoline or fuel ranging from the Analysis of Global Secu-
ethanol, methanol from a variety of its stocks derived from rity, USA
agricultural materials to waste and coal. Flex fuel vehicles
provide a platform on which fuels can compete and let
consumers in the market choose the willing fuel in this
stock based on economics..."

"...UKRAINE’S New Energy Alliance is a non-profit orga-
nization which carries out projects in the field of energy
conservation, energy efficiency as well as advancement
of energy efficiency policy, lobbying of bills, regulatory
and legal framework at the legislative and executive
levels. ...We’d like to give an overlook of the real things
that can be done in Ukraine and what is being done to
transfer at least 10-12% of the Ukrainian economy to use
of alternative energy sources. We are preparing grounds
for building wind power plants; we have advanced great-
ly in the project of generating energy from wave power;
we intend to develop geothermal power engineering in
Ukraine. One more project, which we believe will be very
important for Ukraine, concerns creation of the techno-
logical centre of future energy. We also intend to create Valeriy BOROVYK,
in Ukraine an investment fund on energy-saving and en- Chairman of the Board,
ergy project implementation. ..." Alliance “New Energy of
"...UKRAINE Has a huge potential, which, however, is not Ukraine”, Ukraine
exploited, because there is no consistency in the state
decision-making system. As of today our political leaders
are focused on the extension of their powers, and not on
the implementation of the strategic projects. We are firmly
convinced that this time will come. Moreover, by means
of our actions and the actions of our colleagues we urge
fundamental decision-making..."
"...INDUSTRY accounts for 40% of total final consump-

tion of energy of Ukraine, district heating systems ac-
count for 45% of Ukrainian natural gas consumption,
and these sectors bear serious energy efficiency poten-
tial, while the potential of renewable energy sources is
neglected so far. Recommendations for better energy
efficiency (EE) and renewable energy sources (RES) use
in Ukraine include: ensuring that prices cover full, long-
term cost of energy supply; development and implemen-
tation of energy efficiency standards for equipment and
buildings rather than relying on normative use of energy
per unit of output and its associated penalties; making
it mandatory to have heat, electricity and gas meters;
using tax policy to promote EE and RES; create incen-
Heikki LEHTIMAKI, tives for efficient energy use on state-owned enterprises
Managing Director, through performance-based contracts for management;
Plan Energy Ltd, Finland supporting the introduction of voluntary energy efficien-
cy agreements; development of energy efficiency funds;
as well as increasing public awareness campaigns and
training programs..."

EXPERT FOCUS
"...FIRST OF ALL, energy efficiency and renewable energy

sources are a business opportunity, and a huge economic
opportunity for national economies. In the particular
case of Ukraine, the country is foregoing the opportunity
to add a whole new economic activity by making sure
that there’s a sector of the national economy that evolves
around implementing and defining energy efficiency of
renewable energy resources. Secondly, energy efficiency
can play a key role in lessening the effects of economic
downturns like the one we are currently experiencing...
Energy efficiency provides a reduction of the operating
costs of enterprises, thus increasing the competitiveness
of those enterprises. Those managers who manage to re-
duce their energy costs in the coming years will be in a
Inigo ARENCIBIA GONZALEZ, perfect position to make the most of the upturn in the
Project Manager, Central and economic cycle..."
Eastern Europe PEP - Energy "...MACKENZIE GLOBAL CONSULTANCY’S assessment
Efficiency, International was that investment in the development of new energy
Finance Corporation sources and new transmission capacities is twice as ex-
pensive as the investments needed to achieve equivalent
energy savings worldwide. That is, for every two dollars
that would have to be invested in new energy sources and
transportation, we can achieve the same result for invest-
ing one dollar in energy efficiency measures...."
"...IF WE TAKE into consideration the fact that 25-35% of
Russian production is the cost of energy, then we see how
important this is for the nation. We have heard that state is
using the energy supply as a political weapon. I doubt this
very much because, basically it is Gasprom which is using the
foreign policy of the Russian state as a weapon to pursue its
commercial goals and not vice versa. We must remember that
when Mr.Putin was President of Russia, during almost all of
his foreign trips he promoted some interests of Gasprom...
We see that corporation acts in the best manner to generate
more cash and cover the shortages of supply..."
"...WE HAVE another hope – a very big and a very serious cri-
sis. If this corporation-government faces a crisis of payments,
a crisis of very acute shortages, e.g. of gas, (Mr.Nemtsov pre- Mikhail KRUTIKHIN,
dicts gas shortage, and some of his associates even predict Editor, Russian Energy
that next winter the Russian government will have to evacu-
ate millions of people from large cities just to save them from Bulletin, Russia
cold because of disruptions in energy supply). I do not believe
in such a possibility but the signals that come from Gasprom,
from the government and from some ministries are very worry-
ing. I believe that a very serious crisis could make the Russian
government to do something with Gasprom..."

"...UKRAINE is at the point when it has to make a choice.
But Ukraine is not making a choice. Ukraine is declaring
its adherence and its respect for general standards and
principles and also is allowing the state as well to con-
tinue to develop all of its unhealthy dynamics..."
"...THE GEORGIAN conflict has vindicated and strength-
ened something that today is much more worrying than
Russia’s actual policy in this part of the world. It is the
mood of Russia. It is the mood based upon a combination
of very deep sense of injury and resentment. And a mood
of feeling satisfaction and pride in Russia’s revival with
dealing with the countries which today is both bully and
victim at the same time. And this complicates relations
across the board. And the apparent success of what has James SHERR,
occurred in Georgia has strengthened this mood and the
interests that are most closely associated with this. And
Head, Russia and Eurasia
the means that strengthened some of the least healthy Programme, The Royal
interests in Russia that Gasprom and much of the energy Institute of International
sector hold within that sector..."
Affairs Chatham House, UK
"...The outcome of the Georgian crisis and the conduct
of the Georgian war underscore key points which the
leaders of Russia want us to understand: that all energy
projects that exclude Russian participation are inherently
unsafe. And that means unsafe investments to make..."
"...The position outlined by Romania’s Prime Minister is
in fact identical to that of the European Commission and
of the majority of states in Europe. What is said recently
is this: Russia is interested in preserving it state’s gas and
oil suppliers. Romania’s interest is a commercial partner-
ship with Russia for gas supplies. Why at the same time
creating competition by finding an alternative supplier?
I don’t see any indication there is a policy to isolate Rus-
sia or exclude Russia, it’s not possible. But there is an
increasingly firm determination to ensure that Russia
cannot be involved in everything or block everything..."

EXPERT FOCUS
" ...WHAT is the formula for improving relations between pro-

ducer, transit and consumer countries – from upstream via
midstream to downstream? There are four main components:
strategic reserves + integrated infrastructure + sources and
routes diversification + transparency. So, the first position:
strategic reserves. The events of 2004-2007, connected with
Russian-Ukrainian and Russian-Belarusian gas disputes, ne-
cessitate the creation of strategic gas reserves.... Of course,
developing strategic gas reserves is not a simple thing, but
quite possible. If you have gas reserves, you feel freer in case
of some extraordinary situation. Ukraine’s advantages lie not
only in the pipeline network with capacity of carrying 130
bln cubic meters of gas to EU annually; it’s main advantage
is that Ukraine possesses the largest capacity gas storages
in the world capable of ensuring continuous gas delivery to
Mykhailo HONCHAR, European consumers in different emergency situations..."
Director of Energy Pro-
" ...THE QUESTION is how do financial flows circulate?
grams, NOMOS Center, We should pay attention to the fact that when people talk
Ukraine about transparency problems, Ukraine is always mentioned
with respect to this issue. That is only partial truth. The is-
sue is that the final result of the gas traffic is a financial
flow emerging at a European end of the pipeline. ...As
you know, Ukraine consumes Turkmen gas. But if you think
that Ukraine buys gas in Turkmenistan, you are mistaken;
Ukraine and Turkmenistan do not have any relations. Neither
does Ukraine buy gas in Russia. De jure, Ukraine buys gas
in Switzerland, in Canton Zug, exactly where RosUkrEnergo
is registered. NaftoGas of Ukraine has a contract with Ro-
sUkrEnergo; by that contract, Ukraine buys Turkmen gas that
is transported through the Russian gas pipeline system to
Ukraine and partially to the EU. And if you think that this
scheme is unique and devised for Ukraine only, you are also
mistaken. This scheme is actively cloned in the EU. Where is
the office of the North Stream? In Canton Zug, Switzerland.
Where is the office of the South Stream? In Canton Zug, Swit-
zerland. Where is the office of Stockman Development? In
Canton Zug, Switzerland. You may just imagine how big these
projects and the financial flows are… And such companies
are established with the aim of redistribution of financial
flows in a non-transparent way..."
"...THUS, as long as these problems are not solved, it would be
impossible to establish any system for relations improvement,
especially considering the fact that some groups do not want
that. In this regard, the financial crisis is a bad thing, but it is
good since it forced us to pay attention to the existence of the
off-shore companies being part of the serious businesses and
also partially causing the current crisis on the stock market..."

"...AS LONG as European companies and politicians are not
aware of the importance of consolidated actions within the
framework of the new European Energy Transit Space initia-
tive, it will be difficult to talk about possible balance of rela-
tions - that is one side. From the other side, it seems to me
that an elegant formula where the transit constituents play
the key role is applicable. The transit components are not
just the link that is important for consumers and for pro-
ducers; it is the link by which being transformed into real
profitable business makes it possible to diversify not only
transport routes but also energy supply sources..."
"...EUROPE has a chance to pay more attention to the Energy
Charter as a perspective instrument. We need to do that in order
to ascertain ourselves once again, that it is not so bad, and that
we should not adapt it in accordance with Russia’s wishes. More Oleksandr NARBUT,
attention has to be paid to the transit states such as Ukraine, Be- Independent Expert,
larus, and assistance should be provided to them to modernize
market energy relations within these states, transforming their Ukraine
transit component into real business..."
"...I WOULD encourage us to further discuss whether politi-

cally motivated interruption to supply, in fact, is the largest
risk facing Eurasian and European energy security. From the
IEA perspective, the risk of underinvestment to the upstream
appears to be a very significant one. Also important is the
issue of generalized lack of transparency along the energy
value chain. I am not just referring to some of the upstream
issues or midstream issues, or issues facing Ukraine, but also
things that we have been encouraging the EU to focus on in
terms of transparency of information, of operation of the Eu-
ropean gas market. Another risk that we face is the difficulty
of generating investment in infrastructure..."
"...THE DEBATE on diversification of sources and supply
along our discussion has occasionally been framed in a more
Tim GOULD, antagonistic way that it was explicitly diversification away
Program Manager, Caspian, from the reliance upon Russia. I think that if you set the
debate up in an antagonistic way, you are likely to get an
Caucasus, Southeast Europe, antagonistic debate. The challenge is about where addi-
Office for Global Energy Dia- tional gas will come from for Europe? Some of it may come
from Russia; it’s entirely legitimate for European consum-
logue, International Energy ers to look in North Africa; from international LNG market;
Agency from Norway; but also from the Caspian and Middle East as
a source for additional gas. There are formidable challenges
about getting that gas out of the ground. It’s not going to
be a short and easy process, but it’s an entirely legitimate
aim for the EU to put together a series of policies that could
make a compelling case for Caspian producers to dedicate
resources to the Southern corridor..."

CAMERA FOCUS

CAMERA FOCUS

CAMERA FOCUS

SUMMARY REPORT
Summary report
Energy security is one of the tremendous challenges of the in the 21st century – along with the
economic and financial crisis, nutrition crisis, and climate change. All of them are interrelated,
but energy security is probably the most demanding among them.
Energy security is a global issue with strong regional characteristics. The Black-Caspian Sea re-
gion is an extremely relevant region for the energy security of Europe. Countries of the region
are major producers as well as major consumers, possessing diverse and complex transportation
networks for energy resources.
Since the problem is global, it requires a common, multiparty response. There have been numer-
ous calls for collective energy security arrangements, or even synergies. Mutual interdependence
and the security vacuum should be solved within a broader, multilateral framework. The Second
Kyiv Security Forum presented an opportunity to discuss mutual vulnerability between producers,
transit countries and consumers.
Major challenges to energy security

All Forum participants agreed that energy security challenges are truly becoming global.
In the long-term perspective, the gap between demand and supply of energy resources will
deepen in the EU, in the region and in particular countries. Consequently, the prices of en-
ergy resources will also increase. Major producing states reached their peak production with
hydrocarbon fields being depleted more intensively than newly discovered fields are put into
exploration. Furthermore, global energy demand is changing in rapidly growing economies,
such as China or India.
There is an urgent need for massive investment to meet future energy demand. But in light of the
global financial crisis and the extreme volatility of energy prices, it represents an exceptionally
difficult and risky challenge. Nevertheless, these investments are absolutely indispensable; their
postponement will endanger the security of supply and subsequently, the economy as a whole.
There is also the growing challenge of climate change. Environmental protection, which used to
focus on prevention of pollution, is now increasingly focusing on reducing global greenhouse gas
emissions and mitigating their climate change impact.
The world is now experiencing greater state involvement in the global energy markets, and
therefore political risks increase, which will have certain impact on international investment

policy. Energy became an element of foreign policy and a mean in international relations. De-
politicization is not expected. Since the security of oil and natural gas supplies to Europe is
sensitive and of major interest to potential suppliers, political interests will always be linked
with economic interests. Almost all producing countries have a political agenda of their resource
exports are connected closely to commercial interests. In different times and circumstances,
Russia, some Middle Eastern (Iran) and North African (Algeria, Libya) states used energy supplies
as a political weapon.
As a result of the resurgence of national authorities and less intervention of the private sector
in resource development, the global community is facing the problems of “resource nationalism”
along with “technological egoism”. The former leads to change in state policies toward foreign
companies functioning on the domestic market, and the latter complicates the security and sta-
bility of supply. China and India are examples of creating national oil companies backed by the
governments which are quite efficient in “field hunting” and pushing out the traditional Western
companies from the market.
This leads to state competition for both oil and gas. As one of the Forum speakers argued, even
though the danger of using energy resources as a weapon was discussed, the problem of using
weapons for getting oil and gas also must be considered. Competition for resources will aggra-
vate, so compromises and negotiations on the international level as well as increased energy
efficiency are seen as the best ways to approach the issue.
Whether caused by political or economic reasons, regional conflicts in the Black-Caspian Sea
region present serious challenges to the security of supply and operability of transit corridors, as
regions and states threatened by instability are at the same time essential producers or transit
nations. De-freezing of local conflicts often strike on critical infrastructure. The Georgian crisis
in August threatened the realization of competitive energy projects which do not include Russian
interests or investments. This presents a serious risk to construction of new pipelines from the
Caspian region to the European market.
Transparency of energy deals earlier was viewed as a problem of national character for some states;
however, now it is becoming higher on the European agenda. Not only Ukraine or other transit
countries are challenged by non-transparent intermediary or investment companies – the whole
of Europe suffers from “Swiss syndrome”. The problem of non-transparent cash flow and shadow
economy deals which harm European energy security was cited by many participants.
Existent European and regional cooperation mechanisms

in energy security
Global distribution of energy resources, current technologies and projections of demand set the
priority for policy-makers to respond to the challenges most effectively and to create functioning
cooperation mechanisms that can mitigate common risks. In addition to the efforts of national

SUMMARY REPORT
governments the role of various international organizations as regulators, facilitators, or security

providers should be advanced.
The Kyiv Security Forum participants agreed that the Energy Charter is a constructive conceptual
framework signed by almost 60 countries declaring readiness to follow such core principles as
national sovereignty over energy resources; respect for contract and property; stable and open
frameworks for flows of energy-related capital, technology and investment; orientation towards
market solutions, non-discrimination, transparency, energy efficiency and sustainable develop-
ment; and predictable, transparent and non-discriminatory conditions for trade and investment.
The Energy Charter provides an accessible multilateral policy forum for a very diverse group of
countries, and a valuable platform for regulatory dialogue on issues effecting the movement of
energy also across the Black-Caspian Sea region. So it is a unique legally-binding, legally-based
multilateral mechanism for cooperation in the energy sector which brings together producers,
consumers and transit countries.
Despite all the positive rhetoric, the Energy Charter was widely criticized. This international
body fails to deliver a comprehensive framework for transit of energy resources from Central Asia
to Europe. Its Transit Protocol has been under development for many years and not adopted yet.
Such important countries for energy security as Russia or Norway did not fully adopt the Char-
ter, and this represents a major challenge to basic rules accepted by contracting parties. Some
speakers even referred to “institutional fetishism”. But it does not mean the Energy Charter
should be rejected. It has to be updated and strengthened by new mechanisms and new tools to
control its implementation.
Regarding the European Union there is a lack of common approach, of common energy policy,
which is the best scenario to strengthen energy security. Discussion of perspectives of the Eu-
ropean energy policy split the audience into optimists and pessimists. The relatively weak com-
mon position of the EU is determined by particular interests of its member states, which differ
because of divergences in energy mix and sources of supply, as well as national political interests.
However, there are still common goals and priorities. The main points for those are the reform of
the price mechanism (towards its equal and transparent formation), the focus on common policy
goals (e.g. strategy on climate change), and the development of energy-efficient and energy-
saving technologies. Many also believe that the current financial and economic crisis presents an
opportunity for new solutions.
The common European energy policy is developing on the following principles: diversifica-
tion of suppliers, efficiency in energy consumption, alternative energy sources, transparency,
dealing with climate change, and, finally, the principle of solidarity of all EU countries which
is quite controversial and depends on the ratification of Lisbon Treaty to be implemented. In
the broader sphere, the EU is continually working on a common framework to integrate national
energy markets.
Due to its holistic approach to security, NATO as a political-military transatlantic organization

acts not only in defense and security sector reform, interoperability, training and exercising but
also in democratic and economic reforms. Not aspiring to become a leading organization in the
area of energy security, NATO has specific tools that can be used in promoting and contributing to
energy security in a comprehensive way, that allow it to play a limited complimentary role. It links
together North American markets, European markets with Turkey as a major transit state. NATO en-
joys more advanced partnerships in other parts of the world that the EU lacks: the Mediterranean,
Middle East, Russia, Ukraine, South Caucasus, and Central Asia. The engagement of all partners
brings the Alliance closer to a strategic horizon for energy discussions and solutions.
The NATO Bucharest summit declaration sets out specific principles and guidelines, and five areas
in which NATO will engage in the field of energy security: information and intelligence fusion
and sharing, project instability, international and regional cooperation, support of consequent
management and support of the protection of critical energy infrastructure.
The Organization of Black Sea Economic Cooperation (BSEC) as a regional framework and platform
for a dialogue can also contribute to the establishment of regional energy policies. The concept
of a wider “Black Sea area” considers the region as a natural bridge between the energy consum-
ing region and energy producing regions and as the largest energy infrastructure development
area. As a regional multilateral organization, BSEC operates via several working groups on energy
and a Project Development Fund. It also shares a common interest with the EU which is being
implemented through the Black Sea Synergy initiative. BSEC could become a regional framework
to create integrated energy markets, to diversify supply and supply routes, to secure vital energy
transportation networks, and to provide equal access to natural resources. However, its activities
should be oriented towards deeper cooperation with the EU to effectively achieve these goals.
Another regional organization – the Organization for Democracy and Economic Development
GUAM – associates countries whose preferable geographic location is also as the bridge between
Europe and Caspian and Central Asian states. Its activities include coordination of member states’
efforts to strengthen energy security by protecting existent transport infrastructure and develop-
ing new energy transit corridors, as well as by implementing common projects connected to alter-
native energy sources. Given the fact that GUAM is a rather new initiative, capable mechanisms
are still to be developed. A very promising issue might become cooperation with other states in
a GUAM+ format.
Security of supply
Energy security first of all means provision of an adequate, affordable, reliable, timely, clean and
uninterrupted energy supply, which is particularly important for a Europe dependent on an exter-
nal sources of supply.
Supply security implies that an exporting state keeps its promises linked to supply deals and does
not misuse its sovereign position to interfere in supply deals. The Kyiv Security Forum discussed
the mutual dependence of demand and supply, particularly European dependence on the energy

SUMMARY REPORT
supply from Russia, a major player in the Black-Caspian Sea region. The dependence is asymmetric
due to the fact that infrastructure limits provision of alternative (to Russian) natural gas supplies
to Eastern and Central European countries even if producing countries from North Africa or the
Middle East would provide the necessary amount of natural gas.
The question was raised: “If Russia cuts the natural gas supply for a week what will happen?”
Some speakers insisted that it will create panic on the consumer side and reflect the asymme-
try which provides Russia with opportunity to misuse European dependence. Other discussants
pointed to Russia’s fundamental interests in being a reliable energy supplier to Europe.
External energy policy is determined by the combination of commercial and state interests, so it
was suggested that basically Gasprom is using energy resources as a weapon to pursue its com-
mercial goals. The Russian corporation acts in its best manner to generate cash and to cover
its own deficit of resources, therefore, the probability of cutting off the gas supply is marginal.
Nevertheless, Russia as a political player definitely has a strategy to control the entire energy
value chain. It acts to monopolize sources and routes of energy supply, blocks any diversification
project which may bring other resources rather than Russian and Central Asian through Russia
to Europe, and promotes its own infrastructure projects. Russian exporting monopoly Gasprom is
present not only on the Russian market but also on the market of Central European countries and
Western Europe. Gasprom controls markets in Ukraine, the Baltic states, Belarus, and has huge
influence in Turkey and Central Asia. It is also quite successful in working with some European
concerns and governments which signed long-term bilateral agreements and contracts to secure
the supply, or to become a hub for Gasprom in Europe, or to have access to Russia’s rich reserves.
Such a strategy was criticized by some speakers who emphasized that Russia does not play fair or
pointed towards “Schroederization” of Europe.
Patience and dialogue were proposed among the solutions to counter the Russian strategy and to
provide better supply security. Moreover, quite a few participants stressed that Gasprom will face
such objective factors as crisis of payments and gas shortages, which will change its policy. It was
also mentioned that some European countries also need to enforce control over domestic politics
and conflicting groups that have specific relationships to the Russian energy establishment in
order to prevent a prevailing of private interests over national ones. Special attention was also
paid to the necessity to search for alternative sources of supply.
Traditional energy supply channels to Europe are Norway, Russia, North Africa, and the interna-
tional LNG market. The considerable oil and gas resources of the Caspian, primarily in Azerbaijan,
Kazakhstan, and Turkmenistan, constitute the most accessible alternative energy supplies for Eu-
rope. The EU needs to develop an active strategy for securing access to the energy resources of
the Caspian, and handling existing competition for them. The problem is that Central Asia and
the Caspian region are landlocked and the only pipeline systems they are connected to Europe
are through Russian territory and are controlled by Russia. Therefore, these routes do not offer
any diversification perspectives. Additionally, the Russian monopoly Gasprom bought all export
amounts of gas from Turkmenistan, Uzbekistan and Kazakhstan for the next 20 years. Western

governments and companies should be more interested in exploration production and invest-
ments in these countries.
Diversification of routes and, more crucially, of sources is needed to secure the supply. It would
allow countries and regions to mitigate the facts of dependency on one supplier and to neutralize
possible interruptions. Markets function best when there are alternative sources and competition
among them.
Europe, being dependent on an energy supply, should be in the position to import equal shares
from all big suppliers. Countries have to make efforts to develop transport infrastructure (pipe-
lines and power bridges) for alternative supplies. The infrastructure within Europe also needs
development to make it possible to transport natural gas from where it is available to where it
is needed.
Infrastructural needs include the construction of a “Southern corridor” – pipelines which would
allow Europe to get energy resources from many producing countries south of Russia such as
Turkmenistan, Iran, Iraq, Azerbaijan and possibly Qatar and Saudi Arabia. The world’s most energy
rich region between the Caspian Sea and the Persian Gulf has to get access to Europe - the world’s
largest energy import market. Without these changes, consumer and transit nations in Europe will
remain divided and insecure in the face of supply monopolies.
What is even more important is sufficient and timely investment. Underinvestment in production
is a clear problem. The costs of getting oil and gas out of the ground have become much higher
and full of risks. More difficult hydrocarbons need new technologies and cash flow, which are pos-
sible through close cooperation of private enterprises and policy makers. Production countries
also need various incentive programs for strategic foreign direct investments.
Forum speakers underlined the business inefficiency of Russian monopoly Gasprom. Gasprom’s
production of gas declined from about 546-549 bcm in 1990 to 148 bcm in 2007. Without a seri-
ous increase of investments, it will face a deficit of gas not only on the international market, but
even on the domestic Russian market. The biggest current problem is the delay of investment
decisions on huge projects requiring enormous expenditures – Yamal and Stockman gas fields.
Fortunately, Russia has the opportunity to increase production of gas via independent producers
operating on its market and via attracting strategic investors.
Security of demand
Growth of demand in both advanced and emerging economies puts enormous pressure on the
global energy market. Therefore, each country has to maintain a competitive and transparent
domestic market which efficiently consumes energy resources. It is mainly the responsibility of
national governments and institutions, but international organizations also have to be engaged,
there should be a political consensus over the much needed internal market reforms.
Creation of strategic oil and gas reserves integrated with developed infrastructure is of tremen-

SUMMARY REPORT
dous importance. Such reserves are a guarantee of safe supplies in extraordinary cases such as
shortages, embargo or natural disasters. Ukraine has excellent preconditions for creation of stra-
tegic reserves, since it possesses one of the world’s largest systems of underground gas storage
facilities which together with an interconnected pipeline system could a provide continuous gas
supply for both the domestic market and European consumers.
It was stressed by many speakers that the most important fundamental element of the function-
ing market – both for Ukraine and other Black Sea region states – is keeping the prices at the
market level. Prices and tariffs (including transit tariffs and payments for storage space) should
be equal for residential consumers and budgetary organizations as well as for industrial consump-
tion. The principle of equal profitability should dominate energy trading, and countries have to
be prepared to pay market prices. Another priority should be establishment of a capable national
regulating body, which should establish game rules on the market of oil, gas and electricity. It
needs to be strengthened to function effectively and independently.
Transparency should also be increased since development of a shadow economy is harmful for
supply security, demand and transit. In the context of the above-mentioned “Swiss syndrome”,
the role of intermediaries – such as RosUkrEnergo which functions in Russia, Ukraine, Hungary
and Poland, and is not just a transporter but also the operator of all Ukrainian gas imports – was
under thorough scrutiny by experts. A transparent system of energy supply based on direct agree-
ments between state monopolies is a system preferred by European energy consumers.
The EU also has to focus on the European gas market. Non-transparent cash flow that is generated
by offshore companies cannot be controlled by national authorities and bureaucracy in Brussels.
The only way to solve the “Swiss problem” is to maintain transparency and freedom of the press in
order to make information available to the public. Transparency of transactions and of ownership
can be reached by dialogue and the involvement of national governments, European organiza-
tional bodies, various NGOs, and the International Energy Agency.
Significant improvement in the business climate is required to attract investments needed from
international energy companies for serious development of various energy sectors including hy-
drocarbons, nuclear materials, electricity and alternative energy. State legislation and regulation
in almost all countries of the region have to be updated to correspond with internationally recog-
nized norms: fair access to geological data, transparent decision making processes, longer licens-
ing periods, use of model contracts, and truly competitive tenders, including production sharing
agreements. Only after such enhancements can the development of the promising potential of
the Black-Caspian Sea region be possible.
Participants of the Kyiv Security Forum also discussed current European policies and instruments
capable of improving the security of internal energy markets. The Energy Community Treaty will
be enlarged through the accession of Moldova, Turkey and Ukraine. The target countries are ex-
pected to apply the whole energy legislation of the EU (i.e. all acquis communautaire). One of
the priorities could be ‘sectoral’ integration in the field of energy, namely joining the Union for
the Coordination of Transmission of Electricity (UCTE). The appropriate steps and measures are

being taken with the recent start of negotiations. However, some criticism towards the EU was
voiced – especially with regard to its reluctance to move ahead decisively in order to bring target
countries into partnership.
Currently the EU is using its European Neighborhood Policy (ENP) as a general approach and
general framework for cooperation with the countries of the Black-Caspian Sea region. The imple-
mentation of the bilateral Memoranda of Understanding on the cooperation in the field of energy
provides a significant step towards further mutual integration on the basis of joint strategic
interests. Latest developments offer Eastern Partnership for strengthening relations with Eastern
Europe and South Caucasus within the broader framework of ENP. Some speakers also believe that
the solidarity mechanism introduced by the Lisbon treaty should also be open to EU’s neighbors.
Forum participants also addressed the possibility of lessening the energy dependency of the con-
suming states beyond a geographic variety of sources to a variety of fuels. Different options are
available and gradually developing – from wind-power stations, solar stations, to geo-energy and
wave stations. However, available analysis argues that investment in the development of new
energy sources and new transmission capacities is twice as expensive as the investments needed
to achieve equivalent energy savings worldwide.
Therefore, the exceptional importance of energy efficiency for energy security of individual
states, the region and Europe as a whole was specifically underlined. Some Forum participants
insisted that energy efficiency is a major pillar towards energy security. Energy efficiency, as well
as renewable energy sources, are seen by many as a business opportunity, and a huge economic
opportunity for national economies. Most of Black-Caspian sea region states in particular could
add a whole new economic activity by making sure that there’s a sector of the national economy
that evolves through implementing and defining energy efficiency of renewable energy resourc-
es. Moreover, energy efficiency can play a key role in lessening the effects of economic downturns
like the one the world is currently experiencing. Energy efficiency provides a reduction of the
operating costs of enterprises, thus increasing the competitiveness of those enterprises.
Security of transit
The transit element of energy security is also vital. After the breakups from the financial crisis
and sufficient decline of oil prices almost all transit projects were stopped, which will have a
negative impact on the diversification of supply and risks connected with old infrastructure.
Transit therefore should become a real functioning business which makes possible the diver-
sification of both routes and supplies. That is why participants of the Second Kyiv Security
Forum concentrated on the perspectives and criticism of the new transit facilities which have
to connect the Black-Caspian Sea region, rich in energy resources, with sufficient and interested
European markets.
Some actions should be undertaken with regard to specific countries: closer engagement of
Turkey into European security structure as a key element of fourth energy corridor (in addition

SUMMARY REPORT
to Norway, Russia and North Africa), modernization of gas transportation and storage systems
in Ukraine through needed investments, as well as reestablishing Georgia as key energy transit
country by restoring its infrastructure.
More intensive and sometimes controversial discussions were held regarding specific transporta-
tion projects. The Nabucco pipeline is considered by the EU as project of pan-European interest.
It will certainly contribute to the energy security of Europe as it is expected to meet 10% of the
EU demand in 2015 with its full annual capacity being up to 31 bcm. But the construction of
Nabucco as an alternative route is complicated by problems with investments and gas supply
sources. There should be competition with other projects and other companies; serious negotia-
tions should be conducted with Iran and Turkmenistan as major producers; involvement of alter-
native sources with better conditions of supply - Azerbaijan, or even Egypt and Iraq, - should be
considered. Nabucco is also closely related to a number of shared borders involved, and therefore
to the security situation in the Caucasus.
Such underwater pipeline projects as North Stream and South Stream were mentioned as even less
realistic than Nabucco. They either require too much investment or depend on political decisions
from Russia’s coastal neighbors which so far mainly strongly oppose for a number of reasons.
Their contribution to European energy security is doubtful – on the contrary, they tend to lock
energy supply routes on Russia and isolate Caspian resources from Europe. One of the questions
raised is why do some countries still insist on South Stream if it will further deepen their depen-
dency on Russia-controlled routes of gas supply? Another issue pointed out is the limitation of
Russian gas resources for both pipeline projects. Even already functioning underwater gas pipe-
line Blue Stream is filled only by 50% of its initial capacity. The environmental aspects should be
also taken into account.
Participants of the Forum also touched upon the Odesa-Brody-Plock pipeline – part of the Euro-
Asian Oil Transportation Corridor project. It is supposed to increase and strengthen the energy
security of the participating countries through the establishment of a reliable route of trans-
portation of crude oil from the Caspian deposits to international markets via the territories of
Azerbaijan, Georgia, Ukraine, Poland, and Lithuania. However, the continuing conflict and the
question of how and under which circumstances the pipeline would be filled with commercial oil
postpone the final implementation of this project.
Another project discussed was White Stream, which is supposed to transport Caspian gas via
Georgia and the seabed of the Black Sea to Europe. This pipeline project could encourage in-
vestments in Caspian gas field development by diversifying export options and transport routes
directly to European Union territory – but only if it will be supported by governments and
needed funds.
The Trans-Caspian pipeline should have linked Kazakhstan and Turkmenistan, rich in hydro-
carbon reserves. with available transit routes in the South Caucasus. It was not constructed
since the middle of the 1990s, while the producing countries were not as much engaged in that
project. The realization of a Trans-Caspian pipeline nowadays is problematic due to a lack of

interest and no definite offer from the pipeline consortium and producers, as well as opposition
of some European countries which rely on long-term contracts with Russia.
The emergence of new regional initiatives in the Black-Caspian Sea region was also pointed
out, - namely, the Baltic-Black-Caspian Sea Energy Transit Space. The process was launched by
Ukraine, Poland, Georgia, Azerbaijan, and Lithuania last year, with Latvia and Estonia joining in.
It is directed by providing a secure, transparent and safe supply and transit of energy resources;
and to provide a mutually beneficial balance between interests of producers, transit countries
and consumers according to the main provisions of Energy Charter and other international docu-
ments. Being an ambitious intergovernmental community of transit countries, it tries to propose
new mechanisms to guarantee security of transit and new approaches towards overall European
energy security.
The Baltic-Black-Caspian Sea Energy Transit Space countries are targeting promotion of projects
of commercial interest to increase transit flows from Caspian producers to European markets.
It is viewed by participating parties as an attempt to develop regional synergy and to build a
pool of countries to use more optimal routes of energy resources transportation and formation
of secure transnational corridors. Some speakers, however, raised concerns, that this is response
to the EU’s inability to create a common energy policy, the lack of political dialogue on this is-
sue, and the absence of common regulation framework on transit. It was stressed by many, that
the initiative should not be treated as a threat but as an opportunity for the improved European
energy security.
Final remarks
Participants of the Second Kyiv Security Forum agreed that spheres of upstream, downstream and
midstream are mutually interdependent. They agreed that major producers are also major transit
states, and also consumers themselves. This has the fundamental impact on understanding that
the idea of energy independence is nothing but a myth; therefore, common solutions are needed
for future security policy.
Pertinent response to the challenge of energy security would be acting at bilateral, regional and
multilateral level. Any initiative to enhance regional cooperation between the EU, the Black Sea
and the Caspian regions now becomes even more important. It has to continue providing security
of supply to the consumers, security of demand to the producers, and security of transit to the
transit countries and those on both ends of it.
The Kyiv Security Forum provided a channel for dialogue to establish a stronger energy policy
framework of producers, consumers and transit space countries. Thus, energy security and the
mutual vulnerability in this field provide an opportunity to continue and further strengthen the
dialogue and cooperation which is today of great importance.

MEDIA FOCUS
November 14, 2008 October 11, 2008

Michael Gaul: NATO Membership Vicious Circle of Energy Market:
will Bring More Energy Security Ukraine’s Advantages
to Ukraine Nataliya Bilousova
Yuriy Onyshkiv
"…The Energy Charter should systematize the
“….Glavred: Who Plays the Biggest Role in European energy market. But not all big gas
European Energy Security – the EU or NATO? producer countries ratified the Treaty. Russia,
Michael Gaul: “The EU and NATO both play dif- in fact through Gasprom, dictates its gas policy
ferent and complementary roles in European to Europe and former CIS states, even though it
energy security. NATO is definitely not an has signed the Energy Charter, nevertheless, it
organization that works on energy issues, and is not in a hurry to ratify and therefore conse-
energy is not the main element of security quently implement the Treaty. Instead, Russia
that NATO works on. Nevertheless, already in strengthens its gas positions monopolizing all
1999, energy security was mentioned in NATO’s the Central Asian gas supplies...”
strategic concept. Vital resources are also of
great importance for our allies. That is why it
is an important security element for us.”
November 11, 2008

On its Own Field Naftogas of
November 8, 2008 Ukraine Strengthens its Posi-
Energy for Creation, tions in spite of the World Crisis
not a Leverage of Influence Oksana Lyven
Nadiya Smiyan
“…Arseniy Yatseniuk welcomes the revival of
“…Yesterday, the Second Kyiv Security Forum Naftogas’ monopoly on the internal state mar-
finished its work. The Forum was organized by ket. “It is a priority task that the Government
Open Ukraine Foundation, financially supported is working on and the Verkhovna Rada sup-
by Victor Pinchuk Foundation under the aegis of ports the Government in it”, – said Mr. Yatse-
the Ministry of Foreign Affairs of Ukraine. 300 niuk. Hryhoriy Nemyria, Vice Prime Minister
participants from 25 countries took part in the of Ukraine on European and International In-
Forum. It is a very important Forum on the eve of tegration stressed: “We are satisfied that Ro-
the Energy Summit that will be held in Baku…” sUkrEnerhgo will be removed from the Ukrai-
nian market. It is really a step forward. Our

government urges for increased transparency Italy, managed to make long term contracts
and consistently upholds this principle…” with Gasprom for 25-30 years. And in these
terms, the mentioned countries are less de-
pendent on European energy policy. The other
countries have been late. Ukraine is also late.
November 14, 2008 Though it is not part of the EU, it is one of the
EU Urges Ukraine to Accept Eu- biggest transit countries transporting the ma-
ropean Rules on Energy Market jority of gas exported by Gasprom through its
Yuriy Onyshkiv territory. Nevertheless, long term contracts on
supplying Ukraine with gas and on gas transit
“…As Helga Schmid said, this week the Euro- through Ukraine’s territory have been always
pean Commission will publish Strategic Energy the object of bargaining. I hope economic
Review, where special attention is paid to se- bargaining…”
curity of energy supplies. The review contains
information on independent integration of the
most isolated European states into European
gas and energy networks. In close cooperation November 11, 2008
with its partners, the EU intends to intensify Is it Possible to Establish a
relations with producer and transit countries Transit States’ OPEC in Eastern
for ensuring sustainable supplies and diversi- Europe?
fying sources and routes…” Vitaliy Martyniuk
"...Transit states in Eastern Europe are in the

most difficult situation as compared to pro-
November 15-22, 2008 ducer and consumer countries. The first thing
Black Sea-Caspian Region and is that they are also consumers and are depen-
European Energy Security dent on producers. The second point is that as
Alla Yeriomenko transit countries they suffer from the double
pressure of producer and consumer countries.
"...Everything is simple in the energy security Transit states could derive benefit from their
sphere. The European Union tries to avoid pay- geographic nearness to oil and gas production
ing attention to the Ukraine’s issue because places. But they have to coordinate their tran-
the financial crisis is a bigger problem. It is sit policies for that. Close cooperation may be
strange that in this situation everybody acts ensured by establishing an organization like
in his own interests. There is no Common en- OPEC aimed at promoting and protecting inter-
ergy policy in the EU. And the most gas de- ests of transit countries in their dialogue with
pendent states, such as Germany, France and producer and consumer countries…"

MEDIA FOCUS
November 7, 2008
Taylor Wants Yushchenko and
Tymoshenko to Work Together November 7-11, 2008
“Black Sea-Caspian Region and
"...It is very important that the President, European Energy Security” –
Verkhovna Rada and Cabinet of Ministers work Forum in Kyiv
together on problems”, said Mr. Taylor. The US Bohdana Kostiuk
Ambassador underlined that Ukraine should
intensify its program on energy efficiency in "...According to Vladimir Rakhmanin’s words,
the economic sector. In accordance with Am- the high level of representation at the Forum
bassador Taylor’s words, price reform in ener- proves that energy security is an integral part
gy sector means increasing prices, which will of international trade, international policy in
be a potential danger for the most vulnerable the Black Sea-Caspian region and on an all-
consumer groups..." European level as well. Vytautas Nauduzas,
Deputy Minister of Economy of Lithuania,
stressed that energy relations connect states
of different regions stronger than historical
November 11, 2008 relations. There are no absolutely energy-in-
Maya Zakhovanko dependent states. Even Russia has needs from
its energy partners - modern equipment for oil
“...In the capital of Ukraine, the Second extraction, timely payments for energy carri-
Kyiv Security Forum “Black Sea-Caspian Re- ers’ transit and so on…"
gion and European Energy Security” started
its work. About 300 participants, high rank-
ing officials, well-known analysts, business
representatives of the EU, Russia, USA, Black November 7, 2008
Sea-Caspian region states and international
organizations will take part in it. The main "...In 2009, Ukraine intends to partially
issues that will be discussed by the Forum turn to a new energy market model, an-
participants are challenges of European nounced Volodymyr Makukha, Deputy Minis-
and Ukrainian energy security; the role of ter of Fuel and Energy, at the Second Kyiv
Ukraine, Russia, states of the Black-Sea- Security Forum “Black Sea-Caspian Region
Caspian region in the new energy policy of and European Energy Security” organized
Europe..." by the Open Ukraine Foundation that was

founded by Arseniy Yatseniuk. According contract with one official structure, the con-
to the words of Volodymyr Makukha, the tract will not be broken by another official
Ministry of Fuel and Energy plans to con- structure? There is no stability at all. …..
vert 10% of the Ukrainian energy market Very often we hear that soon Ukraine will
to the model of direct contracts. This will tell the world about its great achievements
create favorable conditions for investment in the energy sector. It would be better to
in and development of the Ukrainian power hear about its small progress made on a day-
system, said the Deputy Minister. He also to-day basis. That is why it is difficult for
noted that reforming the Ukrainian energy me to see any energy strategy in Ukraine’s
market is necessary for uniting European actions. I should say I would be pleased if I
and Ukrainian power systems…" am wrong..."
November 15, 2008

Energy Dependence: Threat to Kyiv, November 8, 2008
Security or Ground for Dialogue? Energy Security for All
Olga Reka Dmytro Kachura
"...John Roberts: It is difficult to answer "...Hryhoriy Nemyria, Vice Prime Minister

whether Ukraine has an energy strategy. on European and International Integration,
From a logical point of view, Ukraine should said that Ukraine’s integration into the Eu-
be in the third or fourth stage of the global ropean energy security system is a strategic
program on reforming energy sector. That priority for our state. The Vice Prime Minis-
means that Ukraine should work on reducing ter supposes that in the event of successful
its dependence on imported gas, implement- integration, Ukraine will be able to involve
ing a wide-scale energy saving program, more investors, modernize and adapt to ad-
developing its own gas fields and other re- vanced technical energy standards. That will
sources. But in reality, there is no progress. also contribute to Ukraine overcoming the
Talking about foreign companies willing to problem of inefficient energy consumption.
work on the Ukrainian market, whom should Hryhoriy Nemyria stated that soon Ukraine
they negotiate with? Who represents Ukrai- will start negotiations on joining the Energy
nian authorities? Is it the President, the Community Treaty..."
Prime Minister, official ministries? Do they
need to wait for some wide coalition? Do
they have guarantees that if they conclude a

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a platform for European

November 6-7, 2008

2 SECOND KYIV SECURITY FORUM

SECOND KYIV SECURITY FORUM 3

16:10 – 18:15 Presentations:

4 SECOND KYIV SECURITY FORUM

SECOND KYIV SECURITY FORUM 5

12:30 – 13:30 Discussion

15:00 – 16:30 Presentations and discussion:

15:00 – 16:30 Workshop 2 (section “F”):

6 SECOND KYIV SECURITY FORUM

16:30 – 17:00 Coffee Break

17:00 – 17:50 Presentations:

17:50 – 18:40 Discussion

19:00 – 21:00 Closing Reception at Restaurant “Opanas”

SECOND KYIV SECURITY FORUM 7

"...IT IS FITTING that this Forum takes place in Ukraine,

Full texts of presentations are available at: http://www.openukraine.org/en/programs/dialogue/security-forum/08/

8 SECOND KYIV SECURITY FORUM

NOVEMBER 6, 2008 SECOND KYIV SECURITY FORUM 9

"...THIS FORUM justly serves as an illustration to an apparent

10 SECOND KYIV SECURITY FORUM

NOVEMBER 6, 2008 SECOND KYIV SECURITY FORUM 11

"...MAxIMUM possible integration of Ukraine’s energy

12 SECOND KYIV SECURITY FORUM

"...ALSO a key issue now which we have to face is our com-

NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 13

"...THE BLACK SEA AREA is a natural bridge between en-

"...THE ADVANTAGEOUS geographic position of the GUAM

"...EUROPE’S SECURITY of the supply of oil and natural

16 SECOND KYIV SECURITY FORUM

"..THERE are two major threats to the energy security

NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 17

"...WHEN you strip all the official presentations that

18 SECOND KYIV SECURITY FORUM

"...THE NOTION of producer, consumer and transit states

NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 19

"...WE SUGGEST development of new additional mecha-

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NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 21

"...RUSSIA definitely has a strategy, and its strategy is

"...NOW GASPROM has a lot of advantages: Gasprom can act as

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NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 23

"...THE CONVENTIONAL oil and gas resources – those

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NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 25

"...DURING the Forum many discussions have been held

"...UKRAINE and its citizens have an opportunity to

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"...INDUSTRY accounts for 40% of total final consump-

NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 27

"...FIRST OF ALL, energy efficiency and renewable energy

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NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 29

" ...WHAT is the formula for improving relations between pro-

30 SECOND KYIV SECURITY FORUM

"...I WOULD encourage us to further discuss whether politi-

NOVEMBER 7, 2008 SECOND KYIV SECURITY FORUM 31

32 SECOND KYIV SECURITY FORUM

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Major challenges to energy security

38 SECOND KYIV SECURITY FORUM