KIEV, Sept. 19 – The Ukrainian government on Monday cancelled a controversial order by the economy ministry about the state gas shipper UkrTransGaz that had jeopardized a $500 million loan from the World Bank.

The order had reduced powers of reform-minded management of the national energy company Naftogaz Ukrayiny, allowing the ministry to directly appoint top management of UkrTransGaz.

"We agreed to cancel the decision," the government said in a statement, adding that a new working group including World Bank and EBRD representatives would decide on steps needed to unbundle Naftogaz's production, transport and sales businesses.

UkrTransGaz, which moves Russian gas to markets in Europe, is a major money maker and the most profitable asset of Naftogaz, which has been negotiating the loan with the World Bank.

Francis Malige, the EBRD's managing director for Eastern Europe and the Caucasus, welcomed the move.

"There was a rapid decision that was considered to be urgent last week, which was not as well thought through as it should have been," he told Reuters by phone.

The economy ministry, at a closed meeting last week, changed Naftogaz’s charter by effectively taking away its power to nominate top management at UkrTransGaz.

UkrTransGaz, which is moving Russian gas to markets in Europe, is a major money maker and the most profitable asset of Naftogaz, which has been negotiating the loan with the World Bank.

Andriy Kobolev, the reform-minded head of Naftogaz, said the order undermines Naftogaz’s negotiations with the World Bank and complicates repayment of $300 million loan from the EBRD.

UkrTransGaz last week projected that it will earn $1.2 billion in 2016, mostly from providing gas shipment services to Russian gas company Gazprom.

Ukraine will probably ship 75 billion cubic meters of Russian natural gas to Europe in 2016, up from 67.5 Bcm in 2015, Ihor Prokopiv, the head of UkrTransGaz, the state gas shipping company, said Tuesday.

Kobolev said the economy ministry’s order also undermines Naftogaz’s legal positions in the Stockholm court of arbitration with Russian gas company Gazprom.

Naftogaz is suing Gazprom for compensation of up to $12 billion claiming the gas transit agreement with Gazprom was unfair. The agreement was signed in January 2009 and was supposed to last through the 2019.

Kobolev said the controversial order would undermine Naftogaz’s legal position.

“The order will stop the process because we, as Naftogaz, will lose our status as a party in the case,” Kobolev told Ukrayinska Pravda online newspaper on Monday. (rt/nr/ez)