20 October 2016

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FT: Ukraine under fire over gas group revamp

Ukraine's creditors have warned that a surprise decision by the government to impose direct control over the war-torn country's prized natural gas transportation company could jeopardise hundreds of millions of dollars of additional financing linked to a $17.5bn International Monetary Fund bailout package, according to The Financial Times.


"The news comes just days after the IMF approved and disbursed a long-delayed $1bn loan," Kyiv-based journalist Roman Olearchyk wrote in the article titled "Ukraine under fire over gas group revamp," published by The Financial Times on September 18.

"If all the facts we have learned from third parties are confirmed, we are very disturbed and this development is very serious," said Anton Usov, a spokesperson for the European Bank for Reconstruction and Development. The World Bank, another primary lender to Ukraine and, more specifically, Naftogaz, the state gas company, is also understood to have raised objections.

Concerns were raised after Stepan Kubiv, Ukraine's deputy prime minister, moved to change Naftogaz's charter, shifting control over subsidiary gas transportation operator Ukrtransgaz to the economy ministry.

Kobolev says Putin uses gas as weapon against Ukraine – HARDtalkMr Kubiv told local journalists the move was designed to unbundle Naftogaz into separate transit and supply businesses, meeting the country's commitments to the European Union's so-called Third Energy Package. The legislative packages govern energy market competition rules that Ukraine signed as part of its EU integration efforts.

Questions remain over the government's move, which was sharply criticised by Naftogaz's management team. Long a loss-making company, the business became profitable after the government raised household gas utility tariffs to market levels as part of the IMF programme.

"As a result of the unlawful actions of the ministry's high officials, Naftogaz may not be able to receive a $500m loan from the World Bank, which is crucial for ensuring secure gas supplies during the winter of 2016-17 in Ukraine," Naftogaz said in a statement. Additional financing from the European Bank for Reconstruction and Development also hangs in the balance.

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