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Ukraine gas sector may get $1.7 billion
Journal Staff Report

BRUSSELS, July 31 – International financial institutions may provide Ukraine with $1.7 billion in loans to help the country pay massive natural gas bills and to fund reforms in the energy sector, the European Commission announced Friday.

The commitment comes less than a week after Ukraine promised to hike domestic natural gas prices, an indication that the government has agreed to start ambitious reforms in the sector.

"I'm extremely pleased that political agreement has been reached with Ukraine on reform of its gas sector which opens the way for a financial assistance package to be provided by the international financial institutions to Ukraine," European Commission chief Jose Manuel Barroso said.

Ukraine has been seeking up to $4 billion in lending from the EC and international financial institutions that Prime Minister Yulia Tymoshenko said was needed to buy 19.5 billion cubic meters of Russian gas ahead of the winter.

Without this gas, which is supposed to be stored in Ukraine’s underground gas storage facilities and used in the winter, European gas consumers had a risk of facing supply disruptions, according to Russian Prime Minister Vladimir Putin.

A price dispute between Russia and Ukraine in January left more than 20 countries in Europe without gas for almost two weeks.

"The agreement should provide the stability needed to significantly reduce the risk of a further gas crisis between Ukraine and Russia and therefore provide the security of supply that member states and our consumers expect," Barroso said.

Ukraine has to pay a gas bill of around $640 million on August 7, Naftogaz Ukrayiny, the national gas company, said.

The European Bank for Reconstruction and Development will lend Naftogaz up to $300 million to help it restock Ukraine's gas storage for next winter. Next year, it could lend up to $450 million for the company to upgrade the gas transit system.

The World Bank is prepared to give the Ukrainian government up to $500 million for fiscal and structural reforms to pay for reforming the gas sector, social welfare payments and other government spending.

The European Investment Bank will also ready long-term loans of up to $450 million to help pay for upgrading the gas transit system.

“Our aim is to improve the sustainability, accountability and above all the transparency of the Ukrainian gas market, to the benefit of both Ukraine and of energy security in all of Europe,” EBRD President Thomas Mirow said. (tl/ez)




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