Ukraine to use EU and IMF money to pay for Russian gas

BRUSSELS - Ukraine plans to use EU and IMF money to pay for Russian gas, but will not pay a cent unless Moscow agrees a market price, its authorities say.

Its caretaker PM, Arseniy Yatsenyuk, made the point at a meeting with European Commission chief Jose Manuel Barroso i in Brussels on Tuesday (13 May).

He said: “We want a deal based on market conditions. If Russia rejects this, we will bring Russia to [an international arbitrage] court in Stockholm. If I’m not mistaken, there’s 20 days left - this is the final call for Russia to sit at the negotiating table.”

He noted that Russia’s ultimatum on gas debts is offset by its seizure of Ukrainian energy assets in Crimea last month, worth “tens, if not hundreds, of billions of dollars.” He listed stolen assets as: 2 billion cubic metres of gas in storage vats; two energy firms; onshore and offshore drilling facilities; and offshore gas fields.

Ukraine’s ambassador to the EU, Kostyantin Yeliseyev, told EUobserver on Wednesday that no EU or International Monetary Fund (IMF) money will be used to pay Russia’s “political” gas price.

“We are not so stupid or naive as to pay this price,” he noted.

“The situation is not easy and time is running: We need to start filling our underground storage facilities so that we can ensure transit of [Russian] gas to European countries [in winter],” he added.

Russian supplier Gazprom has said it will halt deliveries to Ukraine on 2 June unless it makes a pre-payment of $1.7 billion based on a price of $485 per thousand cubic metres (tcm) - almost twice the amount charged to its EU customers.

Last year it offered Ukraine $268.5 per tcm as part of a bailout for its former leader Viktor Yanukovych.

But it cancelled the offer when he fell from power and Ukraine resumed preparations to sign a free trade pact with the EU.

For its part, the EU on Tuesday signed off a €1.6 billion macro-financial aid package to Ukraine, saying the first part, worth some €600 million, will be disbursed “soon.” The deal comes on top of an IMF bailout tranche of $3.2 billion paid out one week ago.

A commission spokesman, Simon O’Connor, noted: “It is aid for the Ukrainian budget to meet its external financing needs, which includes payments in the energy sector.”

Barroso told press alongside Yatsenyuk: “Russia, if it wants to be seen as a credible supplier cannot play political games with energy.” He added: “If Russia continues with this kind of behaviour, it will only lead to its further isolation.”

The EU is trying to set up a meeting with Ukraine and Russia’s energy ministers before 2 June to solve the gas dispute.

It is also taking steps on the broader crisis in Ukraine.

Barroso noted that preparations are afoot to sign the free trade pact with Ukraine after elections on 25 May, legally cementing its pro-Western path.

EU ministers earlier this week threatened to trigger economic sanctions against Russia if it derails the May vote.

Yatsenyuk also said Ukraine’s new president is likely to come to Brussels on his first international trip after the election to sign the trade treaty.

The gas row comes amid continued fighting between Ukrainian forces and pro-Russia separatists in eastern Ukraine, which saw six Ukrainian soldiers and one rebel killed in an ambush on Tuesday.

The US the same day released fresh satellite footage showing that Russian President Vladimir Putin i did not make good on his promise to move troops away from the Ukrainian border.

“Russia will fail to make Ukraine a failed state,” Yatsenyuk said in the EU capital.