Ukrainian Economist Viktor Skarshevsky: Gas Prices Being Raised in Ukraine Has Nothing to Do with “Fighting Corruption”

Translated by Ollie Richardson


The statements of the Prime Minister of Ukraine Vladimir Groysman about the need to increase tariffs in order to combat corruption are a manipulation. 
This was stated at a press conference in Kiev by the economist Viktor Skarshevsky.

“If these tariffs increase, then not 50% of families will receive subsidies, but 90% will. And not 70 billion hryvnia will be needed from the budget as finance, but 90-100 billion hryvnia. The problem is not tariffs, but that Ukrainian citizens have become too poor to pay for utilities. And increasing natural gas tariffs doesn’t solve this problem. They say that it is needed in order to make a standard price for the population and for industry to eliminate the possibilities of corruption. I want to quote Groysman two years ago, on April 21st, 2016 – back then there was a sharp, many-fold increase in tariffs for natural gas for the population. What did he give as an argument? ‘When gas for one category costs 3,000 hryvnia and for another one it costs 7,000 hryvnia, I want to assure you that they document it as 3,000 for the population, but sell it (to industry) for a price of 7,000, earning many billions’.

Looking at the current prices – are they identical? For the population – 7,000 hryvnia, for industry – 9,500 hryvnia. The difference is 2,500 hryvnia, so if to proceed from Groysman’s logic it is bought for 7,000, sold for 9,000, and many billions are earned. And now Groysman says: ‘It is impossible to raise the price for the population, we will reconsider the formula’. I.e., according to his logic, it turns out that he stimulates corruption in the gas sector,” concluded the economist.

According to Skarshevsky, corruption in the gas sphere is caused not by a difference in tariffs.

“If to look at the statistics for 2015-2017, then after the price increase for the population, consumption should decrease sharply, there is already nothing to falsely document. Let’s look: for 2015 – 12,100,000,000 cubic meters were consumed by the population; for 2016 – 12,400,000,000 cubic meters were consumed, which is 300 million more; in 2017 – it increased by 2%. I.e., corruption in the gas sphere obviously has nothing to do with tariffs. It’s just that we are given inadequate information and economic and political categories are manipulated”, he said.

In the opinion of the economist, a difficult time awaits Ukraine in 2019-2020, because big monetary payments coincide with electoral campaigns and the corresponding increase in payments to the poor.

“Ukraine in 2018 will survive without IMF credits. And even if Ukraine won’t enter the capital market, the eurobonds that are planned in the sum of 2.5 billion dollars are nothing terrible. Gold and foreign exchange reserves will simply decrease to 14-15 billion dollars. But in 2019-20, where the demand for currency is 9 billion dollars annually, including payments for currency bonds of a domestic loan, this will be a problem. And especially if to consider that next year there are two electoral campaigns, plus social populism — increasing payments to poor citizens, then hard economic times await Ukraine,” stated Skarshevsky.

According to the expert, if this is superimposed on a worsening in the external economic situation, i.e., a global decrease in prices for raw materials, “then Ukraine can expect the same consequences that we observed in 2014-15”.

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