Sectors we work in View list of sectors and key topics Project information Project finder Independent Project Accountability Mechanism

What we provide Products and services Policy reform Operations and processes Evaluating our work Strategies and policies Client due diligence Comment on our work

Key themes and topics The war on Ukraine The EBRD and digitalisation EBRD Green Coronavirus pandemic Economic Inclusion Food security Securing Chernobyl site Local currency

Economic research Economics at the EBRD Office of the Chief Economist Economics, Policy and Governance Transition Report

Background History of the EBRD Basic documents of the EBRD Contacts View by country and department Media enquiries

Structure and staff President Odile Renaud-Basso Board of Governors Board of Directors Executive Committee Senior leadership group

Our values Multiparty democracy and pluralism Promoting transition Environmental and social sustainability Integrity and compliance Backing gender equality Transparency

Partnering for impact Donors Civil Society Alumni Association

Albania Armenia Azerbaijan Belarus Bosnia and Herzegovina Bulgaria Croatia ​Czech Republic Egypt Estonia

Georgia Greece Hungary Jordan Kazakhstan Kosovo Kyrgyz Republic Latvia Lebanon Lithuania

Moldova Mongolia Montenegro Morocco North Macedonia Poland Romania Russia Serbia  

Slovak Republic Slovenia Tajikistan Tunisia Turkey Turkmenistan Ukraine Uzbekistan West Bank and Gaza    

Project finance Loans Equity The financing process Why finance with us? Eligibility checker  

Support for SMEs Advice for businesses Finance for businesses Donor support Flagship programmes EBRD Know How Academy

Procurement Project procurement Corporate procurement and Consultancy services Trade Finance Trade Facilitation Programme Trade Ready  

More ways to work with the EBRD Capital Markets Loan Syndications Careers Working at the EBRD

For Ukrainian energy officials, 24 February 2022 was always going to be a big day.  

Years of planning to integrate Ukraine’s electricity network with that of the European Union – rather than of Russia and Belarus, a Soviet-era holdover partnership – was to be tested that day by briefly isolating Ukraine’s electrical transmission system to make sure it could work independently. If all went well, the test would be a step forward to integrating with the European grid by the end of 2023, via an interconnector that allowed Ukraine to link its grid through that of neighbouring Romania.  

But, as it turned out, 24 February is now mostly remembered for a different reason. It was also the day Russia began its war on Ukraine. 

“It coincided that the start of the war and planned date of isolated mode test were on the morning of 24 February,” says the EBRD’s Olga Yeriomina, a senior banker in the Energy Europe group.  

“The test had been supposed to last for a couple of days, up to one week, and they then planned to have further tests in the summer. But the war accelerated all developments. After that, there was no opportunity to reintegrate with Russia and Belarus. Instead, Ukraine went on working in isolated regime for more than half of the month, until 16 March, then integrated on an emergency basis into the European grid. This integration was successful, and since then the Ukrainian grid has been technically synchronised with the European grid, ENTSO-E.” 

War may have given Ukraine an unexpected push towards joining the European electricity grid faster than expected. But Ukraine and its neighbours in eastern Europe have long understood the broader geopolitical point that where your country’s infrastructure connects to also defines who your closest partners and allies are.  

The countries to Russia’s west were, after the Soviet collapse in 1991, still part of electricity, gas and transport networks that centred on Moscow, encouraging continued economic links with the former Soviet world. But these countries have been working for years to escape their “all roads lead to Moscow” inheritance by creating new, more westward-focussed, utilities and transport links. 

Technically speaking, the tool that allows utilities networks to do this is the interconnector – the physical structure that enables energy to flow between networks, allowing European partners to share electricity and gas in the most efficient and sustainable way possible and also connect to other systems as soon as they are synchronised.

As Mark Magaletsky, EBRD Ukraine deputy head of office and infrastructure expert, explains, in the case of gas, where the vast pipelines that cross Europe were originally designed to carry gas from Siberia to the west, the other big advance of recent years has been the enabling of reverse flow – allowing gas to move from west to east, too. 

The usefulness of this became clear in Ukraine after 2014, Magaletsky adds, when Russia annexed the Crimean peninsula and backed separatists in eastern Ukraine. Ukraine stopped buying gas from Russia in the following year, though it continued to service Russia’s transit flow of gas to Europe.

Ukraine produces its own gas, but pre-war production was around 18 billion cubic litres while demand was 25-30 billion cubic litres, meaning about one-third of Ukraine’s gas still needed to be imported.

Thanks to a relatively small investment in interconnectors and reverse flow, it was able to make up this domestic shortfall by buying gas from Europe and importing it through interconnectors in Slovakia, Poland and Hungary. Although this gas was more expensive, it solved the problem. 

Until the war, at least. In today’s Ukraine, safeguarding the provision of gas is again a headache for the authorities. Domestic gas production is concentrated in two areas, on in the northeast around Kharkiv and another in western Ukraine. While western Ukraine has been less touched by the war, Kharkiv has been under heavy attack, although, even if a number of facilities have been destroyed or suspended operations, production has largely remained operational.  

The EBRD is lending €300 million to the gas company Naftogaz (NAK) to compensate for the loss of production and make the emergency gas purchases needed to fill its system by autumn. But more is needed.  

With much less fiscal space due to the enormous expenses of the war, the Ukrainian authorities are drawing what comfort they can from the fact that both electricity and gas consumption are down by about 30 per cent because people have been fleeing the war – perhaps meaning there will be less need for expensive imports at prices that have doubled this year. 

“Let’s see what the total will be this year - but I would expect that Ukraine would still be dependent on purchases for certain substantial volumes of gas,” Magaletsky adds. 

(An equally pressing infrastructure headache for Ukraine – though one that can’t be solved by interconnectors – is the need to export its grain to world markets despite Russia’s current blockade of the Black Sea ports along its southern coast. Ukraine and Russia export about 30 per cent of the world’s grain, so this blockage threatens food security worldwide.

Solutions such as exporting to the west up the Danube, through small Ukrainian or Moldovan river ports, or sending grain out by road or rail, are being tried, though none of these can cope with the massive quantities of grain waiting for export.

Frustratingly, Ukraine, which was once part of the Russian empire, still has Russian train lines built with a wider gauge than the train lines of Europe use, and this complicates passage onto European narrow-gauge lines, meaning freight has to be reloaded at the border. Here, the best solution now available is short sections of wide-gauge lines running a few kilometres into Polish territory and of narrow-gauge lines running into Ukraine, allowing a little more space for loading.) 

Still, now – with the war on all minds, and with Ukraine and neighbouring Moldova having recently won candidate status to begin trying to join the European Union – the process of realigning what infrastructure can be reshaped is speeding up around the region. 

North of Ukraine, the Baltic states – Estonia, Latvia and Lithuania, which joined the EU back in 2004, and agreed with Poland in 2018 to synchronise their electricity grid with the continental European network by 2025 – are keen to accelerate the process of electricity integration, though for technical reasons making this change is harder and taking longer in those countries. 

“Lithuania, Latvia and Estonia have always considered their dependence on Moscow as a threat, and their concerns have increased since the crisis in Ukraine. However, cutting this “umbilical cord” has been an uphill struggle,” the European Commission said in 2018.    Tiny Moldova, another former Soviet republic which lies behind the Ukrainian port of Odessa (currently blockaded from the sea, like all Ukrainian ports, by Russian forces), has an electricity grid closely linked to Ukraine’s, so switched into the European grid when Ukraine did.  

Another key advance has already been made in diversifying Moldova’s sources of gas. Moldova is a gas importer. But its planned imports for 2022 are vulnerable to potential interruption as a result of the war on Ukraine, since until now these imports have all come via Ukraine from the Russian company Gazprom, under a contract that expires in 2026. 

However, recent progress in implementing the EU’s third Energy Package, and the commissioning of a gas interconnector between EU member Romania and Moldova in 2021 - financed by the EBRD - means Moldova has the technical wherewithal to substitute provision from EU hubs, via the interconnector, in case of supply disruption.  

In June, the country took the next step by borrowing €300 million from the EBRD to boost its energy security by acquiring strategic gas reserves from the EU to supplement those provided by Russia. The loan will finance up to one-fifth of Moldova’s planned gas imports for 2022, ensuring uninterrupted gas supply in Moldova and safeguarding the basic needs and economic livelihoods of 2.7 million Moldovans and refugees from Ukraine. 

“This gives a lifeline for Moldova. It both helps to diversify the country’s supply sources and makes it possible for Moldova to import 100 per cent of its energy needs from the EU via the interconnector in summer and up to 60 per cent in winter,” said Angela Sax, the EBRD’s Head of Office in Moldova. 

The potential for good of such apparently small technical changes becomes particularly clear when considering how Ukraine – with a wartime deficit of at least €5 billion a month to finance – is now planning to use its new electricity connection to sell electricity to the European market. 

In early July, Ukraine – which produces more electricity than it needs, mainly from nuclear power and large hydro – started to trade its electricity with “initial capacity of 100 megawatts, aiming to gradually increase exports to the European grid with a review of capacity on a monthly basis,” says Yeriomina.  

Ukraine’s full export potential is estimated at around two gigawatts, once it has complied with grid stability norms and installed stabilisation equipment. Grant funding of these technical upgrades is pre-agreed, and part of EBRD lending totalling just under €150 million to the Ukrainian electricity transmission system operator (TSO), Ukrenergo, is earmarked for a study to identify any further measures needed to accelerate its commercial integration into ENTSO-E. 

“The expectation is that capacity will be growing by roughly 100 megawatts every month,” Yeriomina says (by late August it was up to 250 megawatts). “And Ukrainians are exploring opportunities to grow these commercial flows of electricity faster still. It is very much in their interests to do so, because the country has energy to spare, due to the drop in local consumption and payment collections as a result of the war. The export of electricity is bringing not only more stability to the operations of the grid in Ukraine, but also providing cashflow to Ukrainian electricity generators and to Ukrenergo.”