Barroso races to prevent escalation of Ukraine gas dispute – FT

09:53, 22 June 2009
World
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Mr Barroso was speaking...

The European Union is racing against time to prevent a Russian-Ukrainian dispute over gas payments from triggering an abrupt energy supply crisis in Europe, according to Financial Times.

José Manuel Barroso, European Commission president, said the EU would hold talks with international financial institutions and gas industry representatives next week to see if they would offer emergency loans to help Ukraine pay for Russian gas supplies.

"We must not sleepwalk into another crisis," Mr Barroso told reporters. "There is indeed the risk of a crisis in weeks, not months."

Mr Barroso was speaking after a two-day summit at which EU leaders approved plans for a stricter European financial supervisory regime to come into force next year.

They also agreed unanimously to support Mr Barroso, a centre-right Portuguese politician, for a second five-year term as Commission president, drawing protests from socialists and Greens who vowed to oppose his nomination if it were put to a vote in the European parliament next month.

But the focus switched to gas as Mr Barroso`s warning reminded Europeans of the Russian-Ukrainian tensions that led last January to the cut-off of Russian gas deliveries to the EU. The 27-nation bloc relies on Russia for about 40 per cent of its gas imports, most of which flow through Ukrainian pipelines.

Businesses and citizens in EU member states that are especially dependent on Russian gas, such as Bulgaria and Slovakia, found themselves deprived of heating last winter for up to two weeks.

The latest crisis centres on Ukraine`s difficulty in finding funds to pay for monthly gas shipments from Russia. Gazprom, the state-owned Russian gas export monopoly, complains that Ukraine`s shortage of money means that it is not importing the full amounts of gas set out in the deal that ended the January dispute.

Mr Barroso said it would be impossible for the EU to meet Ukrainian requests for $4bn (?2.9bn, £2.4bn) in credits to buy Russian gas, but indicated that international financial institutions might help.

"We don`t have that money in the [EU] budget. We want to help our Ukrainian friends, but they have a structural problem. They`re in a serious situation," Mr Barroso said.

"The basic problem is with Ukraine`s ability to pay for its gas supplies from Russia, and that is not our responsibility. We cannot spend the [EU] community budget on that, but we will see if others can make a contribution."

Mr Barroso said he had already been in contact with Dominique Strauss-Kahn, the International Monetary Fund`s managing director, as well as with Vladimir Putin and Yulia Tymoshenko, the Russian and Ukrainian prime ministers.

Mr Putin has suggested that the IMF could help Ukraine by allocating the country some of the $10bn that Russia says it intends to invest in IMF bonds.

Ukraine made its May monthly gas payment to Russia only at the last moment and by means of a central bank credit that economists said risked damaging the state`s budgetary discipline.

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