| WASHINGTON, July 8
WASHINGTON, July 8 Ukraine must reform its
historically inefficient and corrupt natural gas markets to
guard against Russian aggression and supply controls, U.S. State
Department officials told lawmakers on Tuesday.
After invading and annexing Crimea this year, Russia cut off
natural gas supplies to Ukraine last month in a dispute over
unpaid bills. Escalation of the nearly decade-long argument
between Moscow and Ukraine over gas imports has raised concerns
about a disruption of supplies to the rest of Europe.
Ukraine has enough gas for now, but the winter heating
season looms. The United States is trying to make sure Ukraine,
Bulgaria and other Eastern European countries are better able to
integrate into the EU's energy market of 400 million customers
to get reliable supplies from Russia and other countries.
"This is an opportunity, it's a moment in time for Ukraine
to walk away from its past," Amos Hochstein, deputy assistant
secretary for energy diplomacy with the State Department's
Bureau of Energy Resources, told lawmakers on a Senate foreign
"Part of its past was a highly corrupt, inefficient system
... instead of using energy as a resource for stability and
security, it was the opposite," he said.
Hoyt Yee, a State Department official for European and
Eurasian Affairs, said corruption is not limited to Ukraine and
that Washington is devoting greater resources to fight the
problem in Central and Eastern Europe and in the Balkans.
Natural gas production in Ukraine still relies on highly
inefficient 1970s Soviet technology, and its energy subsidies
have hurt investments.
And Russia has accused Ukraine of siphoning off gas that was
meant for shipment on to Europe, and of not paying its bills.
If the United States pours money into Ukraine to fix energy
problems it will make little difference without the reforms, the
officials told lawmakers.
"If corruption and inefficiency continue along with
crippling energy subsidies for consumers, Ukraine will be right
back where we all started," Hochstein said.
Senator Christopher Murphy, a Connecticut Democrat,
questioned how the United States can ask Ukraine to tear down
its natural gas system and rebuild to make it more efficient and
impose fuel price increases on consumers when the new government
Hochstein said instead of abandoning Soviet-era natural gas
infrastructure, Ukraine could embark on subsidy reform and
better manage its existing system to encourage investment by
international energy companies.
Ukraine has large shale gas resources that are not being
developed, resources similar to ones in the United States that
international energy companies have been drilling in recent
(Reporting by Timothy Gardner, editing by Ros Krasny and David