Russia’s state gas giant Gazprom has threatened to cut off its supply of natural gas to the Ukraine starting from June 3rd, unless the Ukrainian government pays $1.7 billion in advance for future shipments.
In a statement on Wednesday, Gazprom gave Ukraine a June 2nd deadline to pay the bill, or it would no longer provide any natural gas to the country, which relies on Russia for one-third of its gas needs.
The Ukrainian government on Wednesday sent a formal request for up to $18 billion in loans to the IMF, said Prime Minister Arseniy Yatseniuk, with the cash necessary to stabilize Kiev’s financial situation and keep the struggling economy afloat.
On March 27, the IMF mission in Kiev had given preliminary approval for a loan of $14-18 billion, but with tough conditions attached.
A German utility company has begun supplying natural gas to Ukraine under a contract signed two years ago, reported the Wall Street Journal, bringing hopes that Ukraine can reduce its reliance on gas imported from Russia.
RWE is the first European energy company to agree to supply gas to Ukraine, with the delivery likely to come via pipelines in Poland.
Russia’s state-owned gas producer Gazprom on Thursday announced another price hike for its sales to Ukraine, the second increase in this week alone, reported Reuters.
Whether it likes it or not, kicking and screaming, Ukraine will have to transform its energy sector, if it hopes to see promised IMF money. Privatizing these assets could raise $50 billion, but the benefits for investors may be even higher.
There is only one certainty in Ukraine: The energy sector must and will be transformed, and how long this takes will depend on who ends up in the driver’s seat and how serious they are about becoming a part of Europe and reducing dependence on Russia. But by then, investors will have missed the boat.
Ukraine will raise domestic gas prices by as much as 50 percent starting from May 1, said the government on Wednesday, in order to meet a key loan condition set by the IMF for an expedited $15 billion bailout.
According to AFP, the IMF had made it clear to Ukraine’s new leaders during meetings in Kiev that an immediate end to Ukraine’s costly gas subsidies was one of its prime conditions to approve the bailout package.
Russia is set to charge Ukraine $500 for 1,000 cubic metres of natural gas, reported the New York Times on Sunday, $100 more than what it was already charging and nearly a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.
Ukraine will be barred from joining a customs union of former Soviet states if it signs a free-trade pact with the European Union this November, warned Russian Prime Minister Dmitry Medvedev on Monday, urging Kiev to make the right political choice for the sake of its businesses and citizens.
The Ukrainian economy may never recover its $13.4 billion outlay to host next month’s European football championship, claimed a report by Reuters on Sunday, as corruption scandals and a growing debt burden continues to weigh heavily on the nation’s investment attractiveness.
A Ukrainian court has sentenced former Prime Minister Yulia Tymoshenko to seven years in prison for abuse of office because of a natural gas deal she signed with Russia when she was in office, enraging the West and jeopardizing Kiev’s hopes of an EU membership.
