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Kiev authorities drive Ukraine into energy crisis as winter is about to set in

November 13, 2014, 16:50 UTC+3 Zamyatina Tamara

MOSCOW, November 13. /TASS/. Shortly after the latest gas war over Kiev’s reluctance to pay Moscow for the previously supplied fuel Ukraine is sliding into a coal scandal. A high-profile deal for the import of coal from South Africa through the London-registered company Steel Mont Trading Ltd. has fallen through with a crash.

After the first 250,000 tons of the overall contracted amount of one million tons travelled a distance of 10,000 kilometers to have reached Ukraine Kiev stopped paying. Steel Mont Trading Ltd, which purchased the coal for Ukraine with a loan taken especially for the purpose, had to enter into a very unpleasant process of settling relations with the lender bank. Also, the company refused to dispatch any more shipments of coal from South Africa so as to avoid reputation losses.

The transparency of this deal with a foreign provider has aroused many questions at the Prosecutor-General’s Office, which has instituted criminal proceedings on the suspicion of embezzlement of state funds. Fuel and Energy Minister Yuriy Prodan and head of the Ukrinterenergo company, Vladimir Zinkevich, were summoned to the Prosecutor-General’s Office for questioning. In order to play down the row the provider of South African coal agreed to publish the contract containing all details of the arrangement with Kiev. This step was rather aimed at restoring the foreign company’s business reputation, though.

Friendly Poland has refused to supply coal to Ukraine, too. Poland’s Economics Minister Janusz Piechoczinski said in public that Ukraine would like to have Polish coal for nothing.

After the disruption of the contract with South Africa Prodan had to acknowledge at the Cabinet’s meeting that “the coal supply situation looked really dangerous and the country would have great trouble with getting through the autumn and winter period.” He added that Kiev had no option left other than try to purchase coal for its power plants from Russia or from the territory of the self-proclaimed Donetsk People’s Republic. Coal from Donbass or from Russia would cost Ukraine 30% less than that from South Africa - $86 a ton ($110-120 a ton transportation costs included).

At the very same meeting of the Cabinet Prime Minister Arseniy Yatsenyuk asked if there was a possibility of importing coal from Australia or the United States. Prodan replied that finding a counter-agent in these countries would take no less than six weeks. In the meantime, the low temperature winter season is round the corner.

The leaders of the self-proclaimed Donetsk People’s Republic have already said that any fuel supplies to Ukraine were ruled out as long as hostilities were in progress. The Donetsk Republic’s Thermoelectric Industry Minister, Aleksey Granovsky, dismissed the possibility of supplying fuel to a recipient the Donetsk Republic regards an aggressor. Besides, Kiev has for several months paid no wages to the coalminers and also froze the coalmines’ bank accounts. In the wake of the recent decision to stop paying pensions and grants to Donbass residents Yatsenyuk would have great problems with conducting fuel negotiations with Donetsk.

The Russian Energy Ministry said it sees no obstructions to supplying coal to Ukraine on the commercial basis.

In the meantime, Ukraine just recently was Europe’s number three coalmining country. In 2013 Donbass produced 83,600 tons of this fuel. The military crackdown on the South-East halted the operation of 145 pits.

Instead of looking for a way out of the energy stalemate Yatsenyuk has ordered the Security Service to investigate “who is behind the re-division of the coal market.”

“The problems with supplying coal to freezing Ukraine is a precise replica of Kiev’s relations with Russian gas provider Gazprom. The authorities in Kiev want to have fuel now and but prefer to pay sometime in the future, or not pay at all. Having received the first consignment of coal from South Africa they turned for another. In South Africa they were told: ‘Come on, guys, you have not paid for the first one yet.’ Further supplies were cancelled,” an adviser to the chief of the Russian government’s Centre of Analysis, Vladimir Averchev, has told TASS.

“The authorities in Kiev had hoped that the whole world would rush to rebuild Ukraine into a shop-window of the ‘free world’. But neither the European Union nor the International Monetary Fund have the slightest intention to indulge in charity,” the analyst said.

“In their policies towards Kiev both the European Union and the International Monetary Fund proceed from their own analysis of the overall political situation in the country. Three weeks after the elections to the Verkhovna Rada no government coalition has been formed yet. The standoff between President Poroshenko and Prime Minister Yatsenyuk is getting worse. No economic reforms are in sight. The military conflict in the southeast of the country keeps smouldering. The treasury is empty. The authorities are unable to stand by their liabilities. In a situation like this Ukraine may well suffer not just an energy crisis, but an utter collapse,” Averchev said.

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