ABSTRACT
But it was a fourth mechanism which was perhaps most decisive as a means through which the Ukrainian political system affected the management of the country’s energy dependence-the system of access to and use of rents of energy dependency. By “rents of energy dependency” we refer to the windfall profits that, under some circumstances, can be made out of a situation of energy dependency, profits received without the creation of value added.1 This apparent paradox can be explained not only through the role of intermediaries in the energy-importing country, but also through the fact that in transition countries such as Ukraine much of the energy import and distribution business is often transacted through illegal or semi-legal means. Taken together with the existence of preferential or subsidized pricing schemes for supplies from Russia, this environment provided excellent legal and illegal opportunities for manipulating price, tax, and trade regulations for the extraction of significant rents. (Many of these opportunities, however, may be available only to those with the needed connections and contacts.) This situation means certain groups are able to benefit greatly from the situation of dependency, privately appropriating its “benefits” while shifting the costs to the state and society as a whole.
