Ukraine near deal with lenders on gas reform

Ukraine is close to agreeing gas sector reforms that international lenders have demanded before they can extend loans to help prevent a cut in Russian gas supplies to Europe, a European Commission spokesman said.

The talks are intended to help national gas firm Naftogaz pay its debts and prevent a repeat of a gas crisis in January.

This raised tensions with Moscow and cut off supplies of Russian gas destined for Europe during two weeks of freezing weather.

"Good progress was made," Commission spokes?man Mark Gray said following talks in Kiev between the Commission, Ukrainian authorities and lenders including the International Monetary Fund.

Ukraine is seeking $4 billion (Dh14.6bn), partly to buy Russian gas for storage ahead of the winter so that it can keep pace with soaring European demand.

International banks have refused to lend money until Naftogaz ends years of subsidising household gas supplies and finds ways to force domestic companies to pay their bills.

"The parties are close to agreement regarding the necessary short- and medium-term commitments by the Ukrainian authorities on reform of the Ukrainian gas sector which would make it possible for the international financial institutions to prepare a package of support for Ukraine," said Gray.

"This would be designed to address both payment difficulties for the storage of Russian gas... as well as reform and modernisation of the gas sector," he said. "The parties will continue to work intensively in coming days."

Ukraine's Prime Minister Yulia Tymoshenko pledged in a letter to the European Union this month that domestic gas prices would be raised, but that is likely to be an unpopular strategy in the run-up to Ukraine's elections in January.

 

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