Global Economics

Ukraine Says It's Paying for Russian Gas


The squabble with Gazprom heated up Dec. 31 when Ukraine said it began paying its back debt for gas but the Russian firm denied it got the money

Ukrainian President Viktor Yushchenko said on Tuesday (30 January) that his country has started to repay a gas trade debt to Russia, but Gazprom said it did not receive the money yet and continues to threaten a cut off on 1 January.

"Payment has been made not only for November but also advance payment for December 2008," Mr Yushchenko said in a statement.

"All impediments have therefore been removed for concluding a mutually beneficial and constructive agreement with our Russian partners for supplies of imported gas for Ukrainian consumers in 2009."

A Ukraine government decree said state energy firm Naftogaz would borrow up to €1.4 billion from two state banks and the country's central bank said it has taken measures allowing the repayment to Russia to take place.

However, Sergei Kupriyanov, Gazprom's spokesman told Reuters that the money has not been received yet and it was "too early to talk about debt repayment."

Having the gas supplies cut off in winter, when temperatures drop way below zero, would be a bitter deja-vu for the Ukrainians.

The weather is milder now—on average around -10 degrees Celsius—than in 2006, when Russia turned off the tap on 1 January. Back then, a cold snap hit lows of -25 degrees Celsius prompting the government to call on industry to cut its gas consumption in order for the scarce supplies to reach the homes of consumers.

According to the Ukrainian ministry of health, 181 people died of cold in the first days of January 2006 and some 3,000 were hospitalized.

The 2006 move also prompted Vladimir Putin's economic advisor Andrei Illarionov to quit, denouncing the "gas war" as political blackmail the Kremlin was exerting on the pro-Western government in Kiev.

The move also led to widespread disruption to EU gas supplies, with 80 percent of Russia's gas sales to the bloc piped through Ukraine.

Liaison with the European Commission

Kiev has set up a group for rapid reaction and liaison with the European Commission on the gas transit issue, Ukraine Prime Minister Yulia Tymoshenko said on Tuesday after phone calls with German chancellor Angela Merkel, EU top foreign policy chief Javier Solana and EU energy commissioner Andris Piebalgs.

The rapid reaction group included representatives of the ministries of fuel and energy, emergency situations and foreign affairs and national oil and gas company Naftogaz Ukrainy, she said.

For its part, Gazprom also announced on Tuesday it had set up its own crisis group aimed at cutting the gas supplies to Ukraine if the money is not repaid fully by the end of 31 December.

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