Blog entry

One foot in Europe: EU Interreg programmes advance the partnership principle in Ukraine.

Ukraine and Interreg

Interreg programmes, key components of the EU’s regional development policy, offer vital financial and technical support for Ukraine’s recovery and integration into European structures. We have previously discussed European approaches to public fund management, emphasising the significance of the European partnership principle and the role of monitoring committees in these processes.

Ukraine currently participates in several Interreg programmes focused on cross-border cooperation and regional development. In May 2024, the Ukrainian parliament ratified five international agreements, which will see the country secure financing through the EU’s Interreg and Interreg NEXT programmes, aimed at supporting broader cross-border and transnational cooperation.

The Interreg NEXT programmes involving Ukraine include the Poland–Ukraine Programme, the Romania–Ukraine Programme, the Hungary–Slovakia–Romania–Ukraine Programme, the Black Sea Basin Programme, and the Danube Region Programme. Additionally, in January 2025, Ukraine officially joined Interreg Europe, an interregional cooperation programme that seeks to help regions across the EU improve their public policies.

Programme focus and impact

Each programme supports projects that address shared priorities, including environmental protection, healthcare, sustainable tourism, and cultural cooperation. For instance, the Interreg NEXT Poland–Ukraine Programme funds initiatives in six Ukrainian regions, while the Romania–Ukraine Programme fosters environmental sustainability and social development across borders.

Indeed, the outcomes of these programmes have been encouraging. As of October 2024, Ukrainian participants have implemented 167 projects, totalling over EUR 91 million in funding. These projects not only improve local infrastructure and services, but also equip Ukraine with valuable experience in managing EU funds in alignment with European standards. As noted in the European Commission’s 2024 Enlargement Package report on Ukraine, this adherence is a critical step towards securing future EU membership.

Governance and oversight

A key feature of Interreg programmes is the role of monitoring committees, which oversee project selection and implementation. The regulatory framework for these committees is primarily governed by the Interreg Regulation and the Common Provisions Regulation, which outline the roles, responsibilities, and operational procedures for these committees.

In November 2024, Ukraine’s Cabinet of Ministers formally approved the management and control procedures for implementing the Interreg and Interreg NEXT programmes.

Importantly, this new resolution contains provisions for monitoring committees, which can include representatives from national, regional, and local authorities, as well as civil society and academic institutions.

This balanced representation ensures that all participating parties have an equal say in decision-making. By including monitoring committees in these procedures, Ukraine will gain invaluable experience in EU governance practices, including sound financial management and transparent project oversight.

Challenges and future directions

Despite these successes, however, challenges remain. Ongoing geopolitical tensions, particularly due to Russia’s invasion of Ukraine, have complicated cross-border cooperation efforts. Consequently, the need for enhanced coordination among stakeholders has become more pronounced as political contexts shift.

For example, some projects have experienced delays due to bureaucratic hurdles and insufficient coordination among partners, impacting their effectiveness and sustainability. Against this backdrop, it is essential that Ukrainian programme participants recognise the need to attract sustainable financing while acknowledging their own capacity to implement projects. Ensuring projects account for these realities is key to long-term success.

Interreg programmes offer valuable opportunities for Ukraine to engage with European partners and secure funding for development initiatives. However, the country must first navigate significant challenges related to funding stability, infrastructure recovery, project management capacity, institutional reform, regional disparities, environmental issues, and integration. Overcoming these obstacles will be crucial for maximising the benefits of participation in these programmes.

Interreg programmes offer Ukraine a robust platform to further develop its monitoring committees, providing a practical example of EU regional policy in action. As Ukraine continues on its path towards European integration, these new learnings will help to strengthen institutional capacity and bring the nation closer to its EU accession goal.

Rebuilding Ukraine: Opportunities for public participation with international donors

The Ukraine Donor Platform will engage with Ukrainian civil society organisations quarterly, yet political platforms must strengthen their role to ensure legitimate decision-making. In 2025, priority should be given to establishing detailed procedures for civil society participation, including submission timelines, follow-up processes, and improved communication.

The Ukraine Facility and Donor Platform

The European Union is providing EUR 50 billion in financial support from 2024 to 2027 to aid Ukraine’s recovery from brutal war. The objective is to address the social, economic, and environmental consequences of Russia’s war of aggression, ensuring long-term reconstruction, modernisation, and resilience. These funds are critical for rebuilding infrastructure, restoring essential services, and supporting vulnerable communities.

The Ukraine Donor Platform, established by the G7 in December 2022, coordinates financial support from international donors. Since its launch in January 2023, the Platform has brought together Ukraine, EU and G7 countries, international financial institutions, and 10 observer nations. Engaging civil society in this process is crucial for ensuring resources are allocated in a coherent, transparent, and inclusive manner.

Public participation in the Ukraine Facility

The Ukraine Facility operates similarly to other European funds such as the Recovery and Resilience Facility and the European Fund for Sustainable Development Plus. Given its alignment with Ukraine’s EU accession process, implementation of the Facility has significant long-term implications. For this reason, the process must be comprehensive and include robust public consultation mechanisms.

Since January 2023, Bankwatch has organised informal dialogues between the Ukraine Service of the Directorate-General for Neighbourhood and Enlargement Negotiations and civil society organisations. These meetings, held on seven occasions over two years, initially aimed to provide civil society organisations with a voice in shaping the Ukraine Facility Regulation. However, these informal dialogues have not evolved into formal consultation mechanisms.

At the national level, the Ministry of Economy has been overseeing the development and implementation of the Ukraine Plan under the Ukraine Facility. While the Ministry for Development is responsible for recovery and restoration, the State Recovery Agency and local self-government bodies handle reconstruction projects, serving as an intermediary for local governments lacking the capacity to implement projects independently. of the Ukraine Plan under the Ukraine Facility. While the Ministry for Development is responsible for recovery and restoration, the State Recovery Agency and local self-government bodies handle reconstruction projects, serving as an intermediary for local governments lacking the capacity to implement projects independently.

One positive aspect of the Ukraine Plan is its adherence to EU regulations on meaningful stakeholder engagement. This commitment to transparency, in line with EU funding best practices, requires authorities to co-design projects with affected communities. Implementation will be overseen by monitoring committees typically comprising socio-economic partners, managing authorities of EU Member States, regional and local bodies, and civil society organisations.

‘Opinions’ as an instrument for empowering civil society

Civil society and other socio-economic partners have the opportunity to submit opinions on implementation of the Ukraine Plan, as outlined in Article 4 of the Ukraine Facility Regulation. This provision allows organisations to report irregularities and provide feedback on government actions related to the execution of the Plan. However, despite this formal avenue of participation, the lack of clear procedures limits its effectiveness.

Some opinions have already been submitted to the Directorate-General, particularly regarding environmental concerns. For instance, Ukrainian non-governmental organisations have raised issues about deviations from environmental impact assessment and strategic environmental assessment requirements. However, these submissions have had minimal impact on decision-making structures, as no dedicated follow-up mechanisms currently exist. And while the European Commission acknowledges these inputs, there is no protocol for ensuring they are considered in funding assessments.

Recent updates indicate that a dedicated website and email will be introduced to facilitate submissions. However, this alone will not resolve the issue of accountability. Without specific guidelines on how opinions influence decision-making, organisations may be discouraged from investing time and resources in providing concrete recommendations.

Ukraine Donor Platform: Steps towards engagement

The Steering Committee of the Ukraine Donor Platform met with civil society organisations for the first time in April 2024. Held in Kyiv, the event brought together key stakeholders from civil society organisations as well as international partners and financial institutions to discuss economic growth. Discussions focused on reforms, economic challenges, and the most pressing areas of need, particularly regarding capacity limitations.

Following this initial dialogue, the Platform committed to holding regular meetings, including two Steering Committee dialogues and two expert-level dialogues on an annual basis. The second expert-level dialogue, held in November 2024, invited selected organisations to discuss regional recovery strategies. However, concerns persist about the selection process and the representativeness of the participants.

To improve future engagements, a more transparent and inclusive process should be established. Civil society organisations should have a clear pathway to propose discussion topics and drive the agenda. The Directorate-General, which steers the Platform’s Secretariat, should ensure that international donors consider the priorities of civil society when communicating with the Commission on future policies and funding allocations. A more structured approach in 2025 will be critical for streamlining the involvement of civil society going forward.

Local-level opportunities for civil society

Reconstruction efforts occur primarily at the local level, making municipal engagement crucial. The Ukraine Facility mandates consultations with local and regional stakeholders, including authorities, social partners and civil society organisations, yet implementation is inconsistent. While Ukraine has made progress in decentralisation, challenges remain in ensuring meaningful citizen participation.

The Ukrainian government has introduced legal frameworks to facilitate this engagement. For example, the 2023 amendments to the Cabinet of Ministers Resolution on Public Participation aim to improve consultation processes. However, according to the National Agency for Corruption Prevention, 30 per cent of regulatory decisions in 2023 bypassed public consultations, highlighting ongoing gaps in transparency and inclusivity.

Encouragingly, the Ukrainian Parliament recently adopted legislation to strengthen democratic processes at the local self-government level, providing additional engagement tools, including public hearings and citizen evaluations of authorities. It also grants the 6.5 million internally displaced persons in the country the right to participate in decision-making in their host communities.

Another progressive step is the pending local democracy law, which over 160 public organisations have urged the President to sign. The law would see the introduction of new mechanisms for public hearings, consultations, and participatory budgeting.

Partnership shows the way forward

Despite these advancements, practical challenges remain in institutionalising effective civic engagement in Ukraine’s public policymaking and stakeholder recovery partnerships. Inspiration can be drawn from how partnerships have been forged during the implementation of other EU funding instruments.

Importantly, the European partnership principle, which requires close cooperation between public authorities, economic and social partners, and civil society at all levels, offers valuable lessons for Ukraine’s reconstruction throughout the programming cycle.

However, while some civil society participation mechanisms exist, they remain incomplete and ineffective. In short, significant improvements are needed at the national level. Bringing about meaningful change will require amplifying the voices of civil society organisations in decision-making processes and ensuring robust consultations at all levels.

Bihor County leads Romania’s geothermal heating revolution with EU support

In western Romania’s Bihor County, the municipalities of Oradea and Beiuș are spearheading this transition. Since the country’s accession to the EU, they have invested more than EUR 45 million in geothermal energy, primarily with the help of EU funds. This vital support has enabled them to adopt best practices and collaborate with specialists from within Romania and abroad.

Western Romania boasts the country’s most abundant geothermal resources. Recognising these valuable local assets, cities in the region have begun to incorporate geothermal energy into their district heating systems, moving beyond their traditional use in the spa and wellness tourism industry.

How did it all begin?

The nationwide exploration of geothermal resources for energy purposes began in the early 1960s. Over the following years, more than 250 wells were drilled, with depths ranging between 800 and 3,500 metres. These excavations revealed the presence of ‘low-enthalpy’ geothermal resources, characterised by relatively low temperatures ranging from 40 to 120 degrees Celsius. This led to the identification of several geothermal zones, mainly in the western part of the country and three areas in the south.

Initially, geothermal energy found applications within industries and the agricultural sector. However, following the fall of the communist regime in the 1990s, the pursuit of geothermal energy in western Romania gained momentum as the region recognised the need to seek alternatives to its costly and polluting coal-fired power plants. This resulted in the gradual adoption of geothermal energy for use in district heating systems, marking a shift towards more sustainable practices.

Geothermal energy in Oradea

One of western Romania’s most notable success stories is Oradea. Over the years, the city has been integrating geothermal energy into its district heating system. In 2020, geothermal energy accounted for 5 per cent of the total energy used. With continued investments and the completion of ongoing projects, this share is expected to rise to 15 per cent of the city’s total thermal energy by early 2025.

In the Oradea area, geothermal energy is primarily harnessed for direct applications such as heating residential and industrial spaces, producing hot water, industrial processes, greenhouse heating, and spa facilities.

Oradea is also home to the first geothermal water-based heating station in Romania. Completed in 2023, the station serves the multipurpose Oradea sports arena and over 1,500 homes across two neighbourhoods. The construction of the project was financed by amounting to a total investment of EUR 3.8 million.

Another project, completed in 2024, supplies geothermal-based heating to over 6,000 apartments in the Nufărul 1 neighbourhood of Oradea. This EUR 19 million investment, supported with EUR 15 million in EU funding, has led to an increase in the utilisation of local geothermal energy resources, including the local geothermal reservoir, for the production of heating and hot water.

The project was carried out in three phases, including the reinjection of geothermal water through a separate well. Additionally, a new 11.2-kilometre network was constructed to transport primary thermal energy, supplying over 200 heat modules at the building scale and replacing traditional heat distribution nodes.

These innovative projects are part of a programme involving the local administration and researchers from the University of Oradea. The programme aims to gradually increase the utilisation of geothermal energy within the city’s centralised heating system. This collaborative effort has also benefitted from valuable contributions from experts in France, Iceland, and Hungary.

The cheapest heating in the country

About 60 kilometres southeast of Oradea lies Beiuș, where Romania’s first geothermal well was drilled in 1996, reaching a depth of 2,500 metres. A pump installed in 1999 extracts up to 45 litres of geothermal water per second at a temperature of 83 degrees Celsius. A second well was drilled in 2004, followed by a third in 2010 with EU funding, specifically for reinjecting geothermal water back into the reservoir.

Since 2008, the municipality’s efforts to prioritise sustainable development have been successful in attracting over EUR 20 million in EU grants. This geothermal resource is now integrated into the city’s district heating system, serving over 1,600 apartments, 300 individual households, local government buildings, schools, the hospital, and the city’s emergency services.

Despite a modest increase in heating costs this winter to EUR 31.60 per megawatt hour (MWh) for the production, distribution, and supply of geothermal-based thermal energy, this outlay remains significantly more affordable compared to other cities in the region.

For instance, in 2022, Timișoara, whose heating system exclusively relies on gas and coal, faced a substantial increase EUR 149 per MWh (excluding VAT). This figure includes a local subsidy of approximately EUR 100 per MWh (excluding VAT), leaving subscribers to pay a net price of EUR 61 per MWh. This considerable cost difference illustrates the major economic advantage of geothermal energy over fossil fuel-based systems.

In light of the rising heating costs, Beiuș City Hall has promised new investments in district heating infrastructure. By the end of this year, the city, in collaboration with the Icelandic National Energy Authority, will develop a 3D model of the geothermal reservoir, utilising drilling data to accurately assess its potential.

The project also includes an energy efficiency study for the transport and distribution system, an analysis of closed-loop geothermal systems, and an evaluation of the suitability of heat pump applications for large consumers. Funded by Innovation Norway, the project will result in a feasibility study necessary for securing additional EU funding.

The geothermal future

Western Romania possesses significant potential for developing geothermal energy projects for district heating. This natural resource offers multiple benefits: economic efficiency through low operating and maintenance costs, minimal environmental impact compared to traditional fuels, and a consistent energy supply, provided the balance between extraction and reinjection is maintained.

Implementing these projects requires strong political will and courage at both the local and national levels, along with the continuation of financial support from a variety of sources. The recent proposal by Dan Jørgensen, the new European Commissioner for Energy and Housing, to develop a geothermal strategy aimed at supporting the EU’s heating needs is a welcome step.

Drawing on the successful examples from Bihor County and numerous other projects already implemented across Europe, western Romania can successfully leverage the potential of this economical and sustainable resource.

EBRD’s Independent Project Accountability Mechanism investigates the Indorama Agro cotton project in Uzbekistan

Holding the EBRD accountable for human rights violations

In 2021, Indorama Agro secured USD 130 million in loans from the EBRD and the International Finance Corporation (IFC) to modernise cotton production and enhance environmental and operational standards. However, the project has faced intense scrutiny over allegations of human rights violations and retaliatory actions against workers and independent rights monitors.

In 2023, after three years of engaging with multilateral development banks and Indorama Agro management, the Uzbek Forum for Human Rights (Uzbek Forum) and Bankwatch filed a formal complaint with IPAM. The complaint detailed grave concerns, including land confiscations, loss of livelihoods for local farmers, mass lay-offs, exploitative labour practices, reprisals against workers, union-busting tactics, and inadequate environmental and social impact assessments.

In November 2024, IPAM deemed these allegations credible and initiated an investigation, which is expected to conclude by the end of 2025. The review will assess whether the EBRD acted in accordance with its environmental and social policy. If the EBRD is found to have violated its own performance standards, IPAM will make recommendations to EBRD management to ensure project compliance and remedy the harm done.

Notably, this is the second complaint filed against Indorama in Uzbekistan to the accountability mechanisms of multilateral development banks. In 2016, Uzbek Forum submitted a complaint to the IFC’s accountability mechanism, alleging the use of child and forced labour by Indorama Kokand Textile throughout its supply chain.

Economic displacement of thousands

In 2018, the Uzbek government transferred 54,000 hectares of land in the Kashkadarya and Syrdarya regions to Indorama Agro. Project impact assessment documents indicated that this decision would potentially affect 1,068 farms, leading to the economic displacement of 5,418 permanent workers and the loss of 9,070 seasonal jobs. Indorama Agro claimed the land was acquired through negotiated settlements with affected farmers, who were offered employment in exchange for terminating their land lease agreements – an arrangement to which the farmers ‘voluntarily’ agreed. However, independent rights monitoring revealed that farmers whose land leases were terminated were given no choice but to sign voluntary land lease terminations under threat of penalty by local authorities. A recent report on land grabbing in Uzbekistan documents cases where farmers did not even know they had lost their land until they arrived at their fields. Because the land lease terminations were deemed voluntary, there was no obligation on the part of the company or the government to pay compensation for losses or damages, including loss of profit.

A 2020 livelihood restoration plan commissioned by Indorama Agro proposed employment as the primary mitigation measure despite evidence that many affected households either declined job offers or were excluded due to reduced labour demand. The document revealed a significant lack of data on project-affected people, calling into question the EBRD and IFC’s due diligence and the effectiveness of proposed mitigation measures.

Nevertheless, both the EBRD and IFC approved loans to Indorama Agro, attaching conditions for livelihood restoration outlined in an environmental and social action plan. By March 2021, Indorama Agro was required to profile affected farm leaders and workers, assess impacts, and develop a revised livelihood restoration plan. Although these conditions had not been met by then, funding was disbursed regardless.

Limited livelihood restoration

The updated livelihood restoration plan, eventually disclosed in May 2024, revealed that 1,062 farms were affected. These were classified as small businesses, averaging one full-time equivalent worker per 10 hectares of cotton land. However, the plan focused solely on the livelihood restoration of farm leaders, excluding farm workers who lost access to land and employment. In fact, the land had been used not only for cotton farming but also for grazing livestock and cultivating vegetables, providing sustenance for entire families. As a result, the loss of land had far broader economic consequences beyond the loss of employment.

Yet, Indorama Agro identified only 1,062 individuals as project-affected, considerably fewer than the at least 5,418 farmer workers impacted by the land appropriation. The number of project-affected people was further reduced for various reasons, with only 90 individuals ultimately acknowledged as eligible for livelihood restoration benefits. Notably, pensioners were excluded on the basis that they receive a monthly pension of approximately USD 58, which was deemed sufficient to sustain their livelihood.

The livelihood restoration measures proposed by Indorama Agro included providing greenhouses, establishing horticulture initiatives, and covering vocational training costs. However, rural residents previously reported that many greenhouses were poorly constructed and collapsed soon after completion. Others stated they were unaware of the greenhouses or how to access them. Additionally, the company’s proposal to engage affected people in silk farming through mulberry plantations has drawn criticism since the silk sector remains under government control and relies on the forced labour of farmers to produce silkworm cocoons.

Concerningly, the company has yet to conduct a comprehensive analysis of the individuals affected by the project, including gender-disaggregated data and other vulnerability criteria, as well as a clear justification for the proposed eligibility criteria. Overall, previous efforts and current measures have not been adequately assessed, casting serious doubt on the sufficiency of the proposed livelihood restoration plan.

Years of exploitative working conditions

Out of almost 15,000 permanent workers and seasonal jobs affected by the project, only 575 individuals were employed by Indorama Agro. Since the project began, there have been regular reports of mass redundancies, low wages, exploitative working conditions, and the misclassification of employees as ‘service providers.’ These ‘service providers’ were given new contracts under a scheme called ‘Nano Unit Contractor’ (NUC), which significantly reduced their rights and benefits, including their eligibility for membership in the trade union. These issues raise questions about whether the economic benefits of working for Indorama outweigh the loss of farmers’ livelihoods. The company has also been implicated in actively undermining Uzbekistan’s only known democratically elected trade union, established in March 2021.

Independent labour assessments conducted at the request of the lenders revealed multiple deficiencies: payment inconsistencies, a lack of transparency and direct communication about contractual changes, misuse of civil contracts, lack of workers’ access to their contracts, excessive shifts and unrecorded overtime, unsafe working conditions, intimidation, and ineffective grievance mechanisms.

The assessment identified flaws with Indorama Agro’s operational health and safety measures, including improper use of personal protective equipment for handling fertilisers and chemicals, weak oversight, such as inadequate inspections and enforcement of safety protocols, insufficient worker training, the absence of fire prevention equipment and evacuation plans, and a lack of accessible information on chemicals management in the Uzbek language. In particular, improper storage and handling of hazardous materials were underlined.

Workers hired by so-called nano unit contractors faced significant challenges concerning working conditions, including inadequate equipment, food, and hygiene facilities, and delayed wages. Female workers lacked separate dressing facilities. Fear of contract termination discouraged these workers from expressing complaints, and the company reportedly failed to adequately supervise or protect their rights.

Ongoing retaliation

Over the past three years, civil society organisations have documented at least 80 retaliation cases against Indorama Agro workers and monitors. Security services, government officials, and company representatives have systematically harassed and intimidated those who attempt to speak out, making it extremely difficult to document these rights violations. Workers and farmers have faced threats and coercion, while security agents have physically obstructed them from attending labour rights workshops and union activities. Human rights monitors have also been threatened with criminal charges for their legitimate work in monitoring the project.

The evidence unequivocally demonstrates widespread human rights violations at the Indorama Agro cotton project and non-compliance with EBRD and IFC safeguards, which have not been adequately addressed. The IPAM investigation is a crucial step to secure effective remedial measures for all project-affected farmers and workers in Uzbekistan, as well as institutional learnings for the EBRD to prevent similar situations in the future.

Against all logic, Bosnia and Herzegovina’s Federal government ramps up fossil gas ambitions

Bosnia and Herzegovina has a very low level of gas dependence – less than 3 per cent of total energy supply in 2022. In the FBiH entity, it is mostly used for heating in Sarajevo. So although a rapid move away from its current Russian gas supply is badly needed, it would make more sense to transform the demand than diversify the supply.

There have been some welcome movies in this direction. In 2022, a promising-sounding 36-megawatt heat pump project was announced for Sarajevo, to be potentially financed by the European Bank for Reconstruction and Development (EBRD). But it’s hardly been mentioned in public during the last year or so, and it’s unclear why.

Misguided gas infrastructure plans

Moreover, BiH appears to be falling into the gas dependence trap. In FBiH, efforts to build a new gas pipeline from Croatia are crowding out efforts to reduce the already low gas consumption. The United States Ambassador to BiH is strongly and publicly pushing the FBIH authorities to move ahead with the project, which would have a capacity of almost six times as much as BiH’s 2022 consumption.

A corresponding and highly controversial ‘new eastern interconnection’ with Serbia is also planned by Republika Srpska, and is being used as a bargaining chip in return for allowing the southern interconnection to go ahead. If built, the pipelines will either result in a major increase in fossil gas consumption, or will turn out to be white elephants.

Southern, western, northern interconnections…

It’s now emerged that the FBiH government has been consulting cantonal authorities about ramping up gas use all across the Federation, even in areas nowhere near the planned Southern Interconnection, like the Tuzla and Posavski Cantons.

As if FBiH isn’t having enough problems building one new gas pipeline from Croatia, the minister mentions no fewer than three: the southern, western and northern interconnections, with the goal of gasifying ‘every part of FBiH’.

It’s hard to overstate how unrealistic this is. All these projects have been around for years and not one has been built. The western and northern interconnections are at an even earlier stage of preparation than the southern one. Three pipelines are simply not going to happen, let alone the distribution network that would need to be built in addition.

Worryingly detached from today’s reality

In fact the government’s whole statement on last week’s meetings with the Tuzla and Posavski Canton heads is worryingly detached from today’s reality.

‘Gasification enables the continuation of the Federation of BiH’s energy independence’, claims the title, in a clear case of doublespeak. But the opposite is true. The European Union has just spent years learning the hard way that gas means import dependence and massive price fluctuations. Where have FBiH decision makers been all this time?

The statement also cites energy minister Vedran Lakić claiming that gas is a lot cheaper than other fuels being used at the moment. But the reason why Russian gas was popular was because of its price: liquified gas (LNG) is more expensive, and Azerbaijan is unlikely to be able to keep increasing its exports. No matter how many import pipelines BiH builds, gas will never be a cheap choice.

Nor was FBiH’s last attempt at gasification exactly successful. Back in 2009, the EBRD approved a project to gasify the Central Bosnia Canton, but although a pipeline from Zenica to Novi Travnik was completed in 2013, it was never put into operation. This was partly due to legal issues, but also because there was not enough demand to make it pay off. If gas was such a good deal, surely the pipeline would have been used?

Decarbonisation through fossil fuels

In a final doublespeak flourish, the Minister’s statement claims the gasification of FBiH will enable gas to be used as a ‘fuel of the future’ in order to fulfill decarbonisation targets and ‘make easier our path towards climate neutrality’.

He is certainly not the only official in the Western Balkans who seems unaware that gas is in fact a fossil fuel and that it is as such incompatible with decarbonisation and climate neutrality, but this lack of understanding of today’s reality is deeply concerning.

Reality check urgently needed

The European Commission, United States and EBRD bear part of the responsibility for the popularity of gas in the Western Balkans, due to their overt political and financial support for new infrastructure.

On the EU front, there have been steps forward in recent years, such as gas projects no longer being prioritised as Projects of Energy Community Interest. But recently, DG NEAR failed to apply the ‘no fossil fuels’ provision when approving the countries’ Reform Agendas under the new Western Balkan Reform and Growth Facility.

The EBRD has in principle limited its gas financing to ‘exceptional cases’, but is still being publicly named as a prospective financier for the Southern Interconnection. And the future regarding the United States’ policy towards BiH is not easy to predict.

With the EU having made progress by achieving an 18 per cent reduction in gas demand between August 2022 and May 2024, and several Member States having bans on installation of new gas boilers, it’s therefore high time for the European Commission to take the lead in clearly telling Western Balkan leaders that the era of gas is coming to an end.

Building retrofits, smart grids, heat pumps, geothermal, rooftop solar, solar thermal and suitably-sited, publicly consulted utility-scale wind and solar all need political and financial support and we can’t afford to be fossil-fooled by gas.

Bosnia and Herzegovina southern gas interconnector: ‘Why gas at all?’ should be the key question

The main driver to build the southern gas interconnection between BiH and Croatia is ostensibly to enable BiH – or at least the Federation – to stop using Russian gas. The country currently has only one import pipeline via Serbia, which is mainly used to heat Sarajevo.

But the planned pipeline’s capacity of 1.5 billion cubic metres annually is six times as much as BiH’s 2022 consumption, and would bring gas to new areas of the country like Mostar. So it’s clearly aimed at expanding consumption, not just replacing it with non-Russian gas. In any case, it will take years before this project is built, and much faster options exist to cut Russian meddling in the country’s energy supply – like renewables.

The law on the project has been blocked for years due to disagreements within the Federation of BiH about the company in charge of the project. The existing transmission operator, BH-Gas, owned by the Federal government, has been developing the project, but the Croat HDZ BIH party wants a separate company to be set up in Mostar, as part of its overall strategy to gain more influence in the Federation.

It’s not surprising that this touches a nerve, as it goes to the heart of fraught questions on the country’s constitution. But it also prevents any debate about the merits or otherwise of the actual project.

Stopping the use of Russian gas is crucial, but framing the question as an either-or between buying from Russia or the United States, or BH-Gas versus a Mostar-based company, precludes questions such as how BiH can phase out fossil gas altogether, increase its energy efficiency and leapfrog straight to sustainable renewables.

This might sound optimistic, but it’s the only logical way forward. BiH has a very low level of gas dependence – less than 3 per cent of total energy supply in 2022, and in the Federation, the main issue is securing heating in Sarajevo. This is a major advantage, which must be maximised instead of increasing gas dependence.

The EU aims to reach carbon neutrality by 2050 at the latest, so if Bosnia and Herzegovina wants to be a member, it has to do so as well – and that includes oil and gas, not only coal.

The EU is making progress in this area, not only increasing its share of renewable energy, but also achieving an 18 per cent reduction in gas demand between August 2022 and May 2024. Several Member States also have bans on installation of new gas boilers in place. But the European Commission, particularly its Directorate-General for Enlargement, has been slow to realise that the Western Balkans can and must avoid getting bogged down in gas dependence, resulting in contradictory messages and support for outdated gas projects.

But increasing gas consumption in BiH would directly contradict the 2050 target, as it’s completely unrealistic to build, use and phase out new gas infrastructure by then.

The pipeline would take years to finish – and official estimates for such projects are usually wildly optimistic. The BiH section alone would be almost 169 kilometres long, partly on difficult mountainous terrain, with expropriation and financing still to secure. There’s no chance it will be finished before 2030, and it’s likely to be much later. So it’s hardly a short-term solution for Sarajevo to free itself from Russian gas.

Options like the Sarajevo heat pump project announced in 2023 are much more promising and could be realised more quickly.

If built, the pipeline will either lock BiH into increased gas use, or it will become a costly stranded asset, wasting scarce public money to pay off loans for nothing whatsoever.

It would not be the first time. In 2009, the European Bank for Reconstruction and Development approved a EUR 19 million loan for a gas pipeline from Zenica to Novi Travnik, which was built but has never operated. But the people of the Federation of BiH still had to foot the bill.

If the quality of the debate on the southern interconnector doesn’t improve soon, we may see something similar happening again, on a much larger and pricier scale.

The European Commission must play a decisive role in the Western Balkans, making it clear that gas is not the future. It needs to step up support for better insulating buildings, developing sustainable forms of renewable energy, increasing the use of heat pumps and improving transmission and distribution networks.

« Previous Page