Independent traders on April 10 accused Ukraine’s largest oil refining company Ukrtatnafta of trying to monopolize the market and breaching the rules of the World Trade Organization.
Earlier, Ukrtatnafta asked the government to impose 30 percent quotas and tariffs on imports of petrol and diesel, the traders said at a press conference in Kyiv.
The dispute was sparked by a letter Ukrtatnafta sent at the end of March to the Ministry of Economic Development and Trade, in which the company asked officials to investigate “a critical increase” in imports of oil and petroleum products.
“Sixty to 80 percent of oil and petroleum products on the Ukrainian market come from Russia and Belarus,” the letter read. “Over the last 12 years, growing imports have led to the closure of the majority of Ukraine’s oil refineries.”
Currently, there are two operating oil refineries in Ukraine – Ukratatnafta’s one in Kremenchug in Poltava Oblast, and Schebelinsky plant in Kharkiv Oblast, owned by Ukrgazvydobuvannya. In 2017 they began to produce petrol and diesel compliant with the European emissions standards, but have been losing out to foreign imports and seek government support.
As a protective measure, Ukrtatnafta, whose ownership is divided between state gas and oil producer Naftogaz and oligarch Ihor Kolomoysky’s Privat Group, proposed imposing a 30-percent quota on imports of petrol and diesel fuel on each import source. Traders exceeding this quota should be charged a 30 percent tariff.
But the idea has outraged independent traders.
Ukraine has not lacked petrol and diesel even in the busiest harvesting seasons thanks to diversified deliveries from over 10 sources, Dmytro Kulik, head of the Oil and Gas Associations of Ukraine said at the press conference.
In addition, the move would contradict the rules of the World Trade Organization, said
Anzhela Makhinova, a partner at Sayenko Kharenko law firm. “Imposing quotas could be justified by a sudden and steep rise in imports of petrol and diesel, but that hasn’t happened in Ukraine. The import growth was natural and gradual, over 12 years,” she explained.
Director of the Kyiv-based A-95 consulting group Sergey Kuyun said imposing quotas and tariffs would lead to price hikes on petrol and diesel and turn Ukrtatnafta into monopoly, as its capacity far outstrips that of the Schebelinsky oil refinery. He said Ukrtatnafta’s claim of a “critical increase of imports” was not true. In fact, it was the opposite last year, he said.
“In 2017, the market share of domestic oil refineries grew to 40 percent, and we forecast it will exceed 50 percent this year,” Kuyun said at a press briefing on April 10. “Switching to the Euro-5 (European emissions standard) allowed them to sell petrol and diesel at the same price as importers.”
The state of Ukraine’s oil refining industry is improving, but its capacity is constrained by insufficient investment into the modernization of plants, Kuyun said. Since 2015, five out of the seven oil refineries in the country have shut down for various reasons – from the war in the Donbas to mere ageing – and are unlikely to reopen due to the absence of investment.
“Privat Group has controlled Ukrtatnafta since 2007 and over that time hasn’t built a single new oil refining plant. It all comes down to repairs of existing equipment. Moreover, the company shut down two plants in Drohobych and Nadvirna,” Kuyun said.
