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Coming winter forces Kiev into paying part of gas debt

September 30, 2014, 18:19 UTC+3 Zamyatina Tamara
© EPA/DARIUSZ DELMANOWICZ

MOSCOW, September 30. /ITAR-TASS/. Although Ukrainian Prime Minister Arseny Yatsenyuk keeps claiming that the country can do without Russian gas, Kiev these days looks far more pliable as winter time is round the corner. At last Saturday’s talks between Russian and Ukrainian energy ministers in Berlin, also attended by the EU’s energy commissioner, Gunther Oettinger, the two countries agreed that Kiev will pay part of its debt for the already consumed fuel, while Gazprom will be supplying gas to Ukraine for six coming months at a price of $385 billion per 1,000 cubic meters. President Poroshenko and Prime Minister Yatsenyuk decided to be cautious so as not to freeze their own people and Europe, several polled experts have told ITAR-TASS.

Ukrainian Energy Minister Yuri Prodan as usual disagreed with the proposal for paying the gas debt by two instalments. At a news conference in Berlin Prodan said Ukraine would like to pay the debt in three tranches, the first one being $1.5 billion.

However, experts believe that the European Union will eventually put pressures on Kiev and the preliminary compromise of October 2-3 will be translated into reality. If an agreement is approved at the EU level, Ukraine will have to pay Russia $3.1 billion by the end of 2014 for the previously supplied gas. Russia, in turn, will guarantee at least 5 billion cubic meters of gas for months to come.

The Russian Energy Ministry has explained that the $3.1 billion in question is only part of the $5.3 billion debt - this is precisely the sum Ukraine’s Naftogaz owes to Gazprom. “The World Bank and the European Union may act as guarantors of the agreement,” Russian Energy Minister Aleksandr Novak has said.

“But the achieved intermediate compromise between Moscow and Kiev on the resumption of Russian gas supplies is largely a result of the political factor: the situation in Ukraine’s war-ravaged southeast is subsiding. Also, October 26 will see elections to Ukraine’s national legislature, Verkhovna Rada, so Kiev is forced to do its utmost to persuade the electorate to stay calm,” the international research director at the Institute of Modern Development, Sergey Kulik, has told ITAR-TASS.

Infographics Ukraine’s debt burden Ukraine’s debt burden
August 29, IMF Board of Directors discusses the second tranche for Ukraine amounting to $1.4 billion, which was postponed due to instability in south-eastern Ukraine. The country received the first tranche in April 2014. Earlier, April 30, the IMF approved a two-year credit totaling $17 billion for the support of the economic program. Infographics by ITAR-TASS
“The internal factors - popular discontent over the shortage of gas and coal and the absence of hot running water - were other reasons why Kiev decided to accept Gazprom’s gas supply offer on its terms,” the analyst said.

“The main reason for Kiev’s preliminary consent to the resumption of fuel supplies on Gazprom’s conditions is a geo-economic factor, in other words, a result of pressures on Ukraine from Brussels,” Sergey Kulik said.

“When the European Union just conceived the Eastern Partnership program for the accession of post-Soviet republics to the EU, Brussels had no idea what sort of financial problems this would entail. These days the European Union, contrary to its original intentions, is unable to stabilize the Ukrainian economy. The hundreds of millions of compensations to farm producers that had to be paid after Russia took retaliatory measures in response to Western economic sanctions dealt a painful blow on the budgets of EU member-states,” the expert said.

“In a situation like this Brussels had to exert heavy pressures on Kiev’s stance to make it look for a compromise with Moscow, of which the EU’s decision to postpone the implementation of the free trade agreement between the EU and Ukraine till 2016 is clear evidence,” the economist said.

“The European Union’s hopes the International Monetary Fund will undertake to deal with the problems of the Ukrainian economy have proved unjustified, and the national governments of European states show no intention to pay Ukraine’s bills. Their budget rules are very strict. As usual, financial and economic considerations have proved more important than political ones,” Kulik said.

“Europe has become the main actor in the search for a compromise between Moscow and Kiev, because it does not want to see a re-run of nightmares of several years ago, when a gas war between Ukraine and Russia left many countries of the Old World freezing. In the meantime, weather watchers say the coming winter will be harsh,” an adviser to the chief of a think tank under the Russian government, Vladimir Averchev, has told ITAR-TASS.

“While Gazprom agreed to lower the price of gas for Ukraine to 385 dollars per 1,000 cubic meters from 485 dollars, Brussels has delayed the enactment of the economic agreement between Ukraine and the European Union - a demand Russia has been pressing for all along. This package of agreements benefits both sides,” the analyst said in conclusion.

 

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