EU holds gas talks with Ukraine - FT

10:00, 18 June 2009
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Ukraine has asked...

The foreign ministers of Germany and Poland held talks in Ukraine on Wednesday aimed at assessing how the EU can help assure the battered country’s stability, according to Financial Times.

Frank-Walter Steinmeier of Germany and Poland’s Radoslaw Sikorski called on Ukraine’s leaders to put aside bitter differences, but held out the possibility that EU countries could rent capacity in Ukraine’s vast underground gas storage tanks in an effort to avoid a repeat of this year’s cuts when hundreds of thousands of people in Europe were left without heat.

“We want to help, because Ukraine is feeling the global crisis particularly keenly,” Mr Steinmeier said, “But the effects of the crisis can only be ameliorated when the main political powers are united.”

Ukraine has asked the EU to consider renting its storage to maintain consistent supplies because domestic demand has fallen below the level necessary to keep the storage system running. Ukraine is experiencing a severe recession that has seen a huge drop in output and forced it to seek aid from the International Monetary Fund and the World Bank.

Europe relies on Russian gas via Ukrainian pipelines to meet one fifth of its demand and is keen to avoid another supply crisis this coming winter.

“During our negotiations with Ukraine, we were able to arrange for a team of experts to examine the current situation and how much gas is being stored,” Mr Steinmeier said.

Ukraine’s imports from Gazprom, the Russian state-controlled gas company are less than a sixth of the level a year ago.

“It doesn’t make sense for Ukraine to pump gas into its storage tanks which is not necessary for the economy,” said Oleksandr Paliy, a political analyst. “It makes sense however to pump it for those who need the storage, namely the Europeans.”

Kiev is pursuing increasingly extreme measures to pay for Russian gas.

Naftogaz, the gas transit monopoly, paid for April supplies with a $2.1bn (£1.3bn) advance against Gazprom’s transit fees through to February 2010.

The government bought back its own bond issues to pay for May supplies

Earlier this week prime minister Yulia Tymoshenko, who is locked in a power struggle with president Viktor Yushchenko, asked European banks to lend Ukraine $4bn to pay for gas.

Ukraine’s largest cities were on Wednesday facing cuts in hot water and heat for cooking after Naftogaz said it was cutting off supplies to more than half the nation’s industrial consumers and regional utilities, which owe an estimated $456m.

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