Ukraine, which is currently conducting complex and lengthy negotiations on its accession to the EU, is under close scrutiny by both European institutions and the international community as a whole. Brussels focuses on the extent to which our country meets the rule of law standards, which are one of the key conditions for European integration. Anti-corruption reforms, judicial reform and transparency in the energy sector also remain important aspects. Reforms in the energy sector are becoming key to creating a competitive market, reducing dependence on external suppliers and ensuring the sustainability of the country’s energy system. Transparency in this sector not only increases investment attractiveness, but also meets the EU’s anti-corruption requirements.
Negotiations are only the beginning, and EU accession remains a complex, multi-stage process. To become a full member, Ukraine will have to go a long way, which includes not only the adoption of European norms and standards, but also their effective implementation. Importantly, achieving compliance with the Copenhagen criteria, which define the political and economic requirements for new EU members, is a critical condition. This includes the stability of democratic institutions, the protection of human rights, the functioning of a market economy, and the ability to cope with competition within the European single market.
The EU demands a transparent energy system
Ukraine’s energy system, which has been severely damaged by Russian strikes, is now becoming a central issue for Europe in assessing the rule of law in Ukraine. European and Western allies have expressed concern about possible political interference in the management of the energy sector, which could be aimed at seizing control of strategic assets. This, in turn, could jeopardise efforts to stabilise Ukraine’s electricity supply during the winter, when maintaining the grid is critical.
In late September, Politico published an article expressing concern over the dismissal of Ukrenergo CEO Volodymyr Kudrytskyi, seeing the move by the Bankova administration as a political and corrupt move.
No one believed the official version of the dismissal of Ukrenergo’s CEO
Kudrytsky was officially dismissed because of the alleged ‘ineffective protection’ of Ukraine’s energy grid from Russian air strikes. However, international observers and diplomats did not support this explanation. Kudrytskyi, who has a reputation for success as a manager, is highly regarded for his efforts to restore the energy system after numerous Russian attacks. Diplomats and international creditors even made a rare public statement calling on Kyiv to change course, and the G7 supported the appeal. Instead, speculation has emerged that his dismissal may be linked to political motives and a desire to centralise control of Ukraine’s energy system. The concern is that Kyiv is not only changing leaders, but also gradually destroying the principle of separation of powers, which is the basis of democracy. Experts fear that political connections may become the basis for awarding lucrative contracts. Moreover, they state that dismissals of energy company executives are not uncommon in Ukraine.
Such fears have been heightened by Ukraine’s aspirations to join the EU and the negotiations that began in June. Speaking to Politico, Kudrytsky said that such fears are justified, warning of excessive centralisation of power. According to him, if the energy system had not operated independently in recent years, the country would not have survived the most difficult winters.
What did the Ukrainian media write about Kudrytskyi’s dismissal?
On 30 August, Forbes Ukraine and Ekonomichna Pravda reported that President Volodymyr Zelenskyy had allegedly demanded that Ukrenergo CEO Volodymyr Kudrytskyi resign at a meeting of the Cabinet of Ministers due to poor protection of energy facilities. However, Kudrytskyi denied that his dismissal was linked to this issue.
Since he allegedly refused to submit his resignation, the Supervisory Board decided to consider his dismissal. On 2 September, the board passed a resolution to this effect, after which board chairman Daniel Dobbeny and member Peder Adreasen resigned, calling Kudrytskyi’s dismissal ‘politically motivated’.
The story of Kulchytskyi’s dismissal continues
The story of Kudrytskyi’s dismissal continued, with several members of Ukrenergo’s supervisory board resigning in protest. This has raised concerns in the European Energy Community, which has warned that Ukraine has until 9 December to resolve the issue of the company’s compliance with European standards, otherwise it risks losing its European certification as a power operator.
The main problem pointed out in the letter from Artur Lorkowski, Director of the Energy Community Secretariat, to the NEURC is the incomplete composition of Ukrenergo’s supervisory board. Out of the seven members appointed by the Ministry of Energy, four should be independent and selected through a competitive procedure. As of today, only four members remain on the board: three appointed by the Ministry and one independent. One of the ‘independent’ positions has been vacant since 2022, and the other two independent members resigned in September 2024 after Kudrytskyi’s dismissal.
The term of the fourth independent member expires on 9 December. Although the Ministry of Economy announced the procedure for electing a new member, it has not yet been completed.
Currently, the Supervisory Board of Ukrenergo can only act in accordance with the quorum requirements, but after 9 December 2024, when the mandate of one of the independent members expires, its activities will become impossible. Given its current composition, the board is no longer able to make independent decisions. Therefore, it is critical that all four independent members are appointed as a matter of urgency – no later than 9 December 2024 – and that a chairman of the board is elected after that.
What will the loss of European certification mean?
Ukraine must resolve all these issues by 9 December 2024, otherwise Ukrenergo risks losing its European certification.
The loss of this certification could have serious consequences. As Oleksandr Kharchenko, director of the Energy Research Centre, notes in his column, this is likely to lead to the impossibility of importing electricity. This situation will negatively affect the process of integrating the Ukrainian electricity market into European standards.
“In bureaucratic European language, the letter reads as follows: ‘Either the Ukrainian side will resolve all issues by 9 December, or the certification will be withdrawn,’ explains Kharchenko. ‘ If the certification is withdrawn, Ukrenergo will no longer be able to be part of ENTSO-E, which will have serious consequences. The main consequence will be the inability to import electricity, which will make it difficult to balance the Ukrainian power system with the European grid.”
In addition, this could affect the confidence of international partners and investors, as instability in the energy sector could prevent the inflow of funding for infrastructure restoration and modernisation. Thus, it is important for Ukraine not only to ensure compliance with the criteria, but also to demonstrate its reliability as a partner in the international arena.
As a result of the war, Ukraine lost more than 50% of its energy capacity. There are plans to increase energy imports from Europe, but the existing interconnectors cannot fully compensate for these losses.
What is in store for the Ukrainian energy system in winter?
Asked whether Ukraine will be able to survive this winter, Kudrytskyi said that everything depends on the weather and the accuracy of Russian air strikes. He recalled the tense days of October and November 2022, when the power grid almost collapsed, which could have led to economic collapse.
Kudrytskyi expressed concern that the situation could repeat itself this year. Uncertainty over control of the power system only complicates matters. “It is too dangerous. If the power system is not working, it paralyses the whole country and complicates supplies to the frontline. You cannot win the war,” he stressed.
Not all funds for energy reach their intended recipients
In 2023, the government decided to allocate UAH 9.7 billion to Ukrenergo to protect substations. However, these funds remained unavailable due to bureaucratic procedures. Kudrytskyi said this in an interview with Forbes. In July 2024, the EU provided Ukrenergo with a €100 million grant to protect the facilities and restore them. The European Commission authorised the German bank Kreditanstalt für Wiederaufbau (KfW) to channel these funds through the EU’s special budget programme, the Ukraine Investment Facility. Since the beginning of the full-scale war, Ukrenergo has attracted at least €1.5 billion in international assistance, of which €324 million was provided with the support of KfW.
Yuriy Boyko, a member of Ukrenergo’s Supervisory Board, said that as of August 2024, the key equipment of the largest substations in Ukraine had been protected by first-level structures (gabions) for more than a year, and the construction of the second level of protection – concrete sarcophagi – was underway, some of which had already been completed.
The dismissal of Volodymyr Kudrytskyi from his position as head of Ukrenergo caused concern among international partners and European institutions, which saw this move as politically motivated and a threat to transparency in Ukraine’s energy sector. If Ukraine does not resolve the problem of compliance with European standards by 9 December 2024, this could lead to the loss of Ukrenergo’s European certification and complicate electricity imports, which threatens both the country’s energy security and the successful completion of the European integration process.
