The political crisis that has erupted in Ukraine is not frightening Russian oil companies, but is encouraging them to strengthen their foothold in the Ukrainian market.
German Khan, executive director of Russian-British oil venture TNK-BP, announced April 3 his company's intention to invest some $400 million in a production and sales network in Ukraine in 2007-2011. LUKoil also spoke about the promising and attractive Ukrainian oil market.
Russian oil companies control two-thirds of the Ukrainian petrochemical market and account for about 90% of oil imported into Ukraine. Four of the six Ukrainian oil refineries belong to Russian companies. LUKoil owns a refinery in Odessa, TNK-BP in Lisichansk, Tatneft in Kremenchug, and Alliance Group in Kherson. Their spokesmen said yesterday that they were prepared to continue working in Ukraine.
Russians have learned the knack of working under any Ukrainian government. In April 2005, the cabinet of Yulia Tymoshenko, concerned about growing gasoline prices, attempted to control the wholesale and retail petrochemicals sector by fixing prices 10%-15% below the market.
The leaders of Russian companies TNK-BP and LUKoil, the largest suppliers of oil and petrochemicals to Ukraine, had to promise to keep gasoline prices stable. Tymoshenko's team considered this a victory, but the Russian oil companies promptly closed their plants for modernization and stopped supplying oil and petrochemicals to Ukraine. Less than a month later, President Viktor Yushchenko publicly criticized his cabinet and assured the oil companies that Ukraine "will use only market tools."
Konstantin Batunin, an analyst with Alfa Bank, said: "The gasoline policy of Tymoshenko showed that the export gas pipeline makes the two countries mutually dependent on the gas market, but Ukraine is fully dependent on Russia for oil deliveries. No matter how the current conflict in Ukraine ends and who comes to power as a result, they will still have to buy Russian oil."
