Due to cabinet’s sloppy gas policy, Ukraine losing international financial support

May29200921:16

When the cabinet revised gas supply contract with Russia, Tymoshenko assured there would be only one and solvent state-run gas monopoly company in Ukraine. Based on this, the talk about attracting western credits to pay for new investment projects was started. However, following the signing of the Brussels declaration, potential investors, Russia including, questioned the propriety of extending credits as instead of the promised sole monopolist several gas companies appeared in Ukraine.

Russia was the first to blow the whistle, offering the EU countries which were behind the Brussels declaration to join in funding Ukraine using a syndicated credit, Yermolayev observes.

The intrigue is that, once Naftohaz has been restructured, the EU governments won’t be sure who will repay their credits. Quite naturally, the EU governments spurned Russia’s proposal, preferring to tread cautiously. Europe will support all steps aimed at liberalizing the gas market, but won’t assume responsibility for such liberalization, the expert notes.

According to Yermolayev, solvency or insolvency is so far only the problem of Naftohaz. It alone cannot lead to a gas war. If Naftohaz fails to honor its payment commitments, Russia will sell gas only based on advance payments by Ukraine.

As an option, Russia might start piling up Ukraine’s debts without stopping gas supplies, Yermolayev argues, eventually laying a claim to Ukraine’s material assets as repayment.

Ukraine’s pipelines cannot serve as Naftohaz collateral, as they are state-owned and are subject to a separate law, the expert noted.