EU optimistic on Ukraine gas dispute - FT

10:15, 30 June 2009
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Progress was...

Progress was made in talks aimed at preventing the latest Russia-Ukraine gas dispute from becoming a full-blown crisis, the European Commission reported on Monday, according to Financial Times.

Participants at the meeting in Brussels, including the International Monetary Fund and the World Bank, stressed that any financial assistance to help the recession-battered Ukrainian government pay its bills would be contingent on continued reform of its gas sector.

They also lowered their estimates for the amount of support Ukraine would need to fill its own gas needs and serve European customers through the winter. One attendee put the figure as low as $2bn – or less than half of previous estimates.

“I think we have a much better sense coming out of this meeting what sort of figure we are looking at, and that figure is certainly less than $4.2bn,” a Commission spokesperson said.

The threat of an imminent supply cut – warned of earlier this month by José Manuel Barroso, Commission president – may depend on Ukraine’s ability to make good on a roughly $300m payment on July 7 to cover its June gas imports. The government says it has so far collected about $150m to do so.

But the larger question remains whether cash-strapped Ukraine will be able to pay for the stockpiles of Russian gas necessary to fill its own needs and supply European consumers throughout the winter. Europe relies on Russia for about 25 per cent of its gas imports, some 80 per cent of which flow through Ukraine.

As of early June, Ukraine claimed to have nearly 20bn cubic metres in storage, and a maximum capacity of 32bn cubic metres.

Prior to Monday’s meeting, the Commission had estimated the country might require as much as 19.5bn cubic metres of additional gas to last until the end of the year. Russia had pegged the cost at $4.2bn.

But one attendee said the parties had determined yesterday that an additional 8bn -10bn cubic metres would likely suffice – a sum that would cost roughly $2bn.

In addition to uncertainty about the weather, the calculations are being complicated by the economic crisis, which has reduced gas demand and prices across Europe. Officials are also struggling with the opacity of the Russia-Ukraine gas trade, which one likened to “a black-box”.

The Commission has insisted it has neither the means nor the inclination to step in as a lender. Still, it was hoping to use the meeting to establish conditions for any loans, including greater transparency.

Monday’s meeting also included representatives from the European Bank for Reconstruction and Development and the European Investment Bank, as well as executives from western gas companies. Also present were officials from the Ukrainian government and Naftogaz, as well as Alexander Medvedev, the deputy chairman of Russia’s Gazprom.

On Thursday, the Commission will convene a separate meeting to ensure that member states are making preparations for possible supply disruptions, such as filling reserves. The aim is to avoid a repeat of the last Russia-Ukraine flare-up in January, when thousands of EU citizens were left without power.




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