Fuel, Credit, and Trade
OLES M. SMOLANSKY
UKRAINIAN-RUSSIAN ECONOMIC RELATIONS ARE CHARACTERIZED BY Kyiv’s dependence on Moscow. Since 1991, this dependence has manifested itself in three distinct but interrelated ways: (1) Russia has been Ukraine’s largest supplier of fuel (above all natural gas and petroleum, but also nuclear fuel needed for Ukraine’s nuclear power stations); (2) Russia has been Ukraine’s largest creditor; and (3) Russia has been Ukraine’s largest trading partner.
In the mid-1990s, when Ukraine’s annual consumption of fuel stabilized at approximately 30 million tons of petroleum and 80 billion cubic meters (m3) of natural gas, its domestic production fell to 4 million tons of oil and 18 billion m3 of gas. This left Kyiv no choice but to import the rest. in line with the pattern established during the late Soviet period, Russia has been supplying approximately 90 percent of Ukraine’s annual oil and more than 60 percent of its natural gas requirements. The remaining 15 to 20 percent of the gas imports have traditionally been delivered by Turkmenistan, and more recently, Uzbekistan.1
Kyiv addressed its dependency in a February 1995 decree, entitled “Ukraine’s Oil and Gas Up to 2010.” The nation’s leaders concluded that Ukraine would still have to rely on its long-term suppliers, Russia and Turkmenistan, for natural gas. However, given the Russian Federation’s dwindling petroleum reserves, Kyiv would be looking for other sources, preferably from the “Persian Gulf basin.”2 Ukraine became essentially dependent on one, rather than two, gas suppliers in early 1997, when the Russian gas monopoly Gazprom obtained a controlling bloc of shares in the