Tags: Russia | Ukraine | gas

Russia Calls In $2 Billion Gas Debt as Ukraine Digs In on Crimea

Image: Russia Calls In $2 Billion Gas Debt as Ukraine Digs In on Crimea
Russian Prime Minister Dmitry Medvedev, left, meets with Gazprom CEO Alexei Miller at the Gorki residence outside Moscow on March 4.

Friday, 07 Mar 2014 11:05 AM

Russia said Ukraine must pay off almost $2 billion it owes it for natural gas by today and signaled it may cut supplies, ratcheting up the pressure on its cash-strapped neighbor as the two nations scrap over the future of the Black Sea Crimea region.

Ukraine hasn’t made its February fuel payment and owes Russia $1.89 billion, according to gas export monopoly OAO Gazprom, which halted supplies to Ukraine five years ago amid a pricing dispute, curbing flows to Europe. Earlier, lawmakers in Moscow said they’d accept the results of a March 16 referendum on Crimea joining Russia as Ukrainian Prime Minister Arseniy Yatsenyuk reiterated that his cabinet deems the vote illegal, saying the region can’t secede.

“We can’t supply gas for free,” Gazprom Chief Executive Officer Alexei Miller said in the statement. “Either Ukraine pays off its debt and pays for current deliveries or there’s a risk of a return to the situation we saw in 2009.”

Already racing to seal a bailout, Ukraine is struggling to keep hold of Crimea after pro-Russian forces seized control of it in the wake of Moscow-backed Viktor Yanukovych’s ouster as presidency. The standoff over the peninsula, once part of Russia and home to its Black Sea Fleet, prompted Western governments to hit President Vladimir Putin with sanctions as the crisis rekindles memories of the Cold War and rattles markets.

‘Urgent’ Aid

Ukraine is a key transit nation for Russian gas to Europe, whose passage was halted for about two weeks in 2009 amid a dispute over prices and transit between the neighboring nations.

Ukrainian Energy Minister Yuriy Prodan said March 1 that Russia was supposed to lend it $2 billion to repay its gas debt. “Since Russia hasn’t provide the funds, we can’t say when we’ll be able to pay.”

As Gazprom released its statement, Yatsenyuk was meeting in Kiev with an International Monetary Fund mission over a bailout. The country needs “urgent” financial aid, he said on the government’s website.

The Washington-based lender is prepared to support Ukraine’s program for economic change and is impressed by the government’s commitment, European department director Reza Moghadam said in a statement.

Ukraine’s international bonds due in June fell 1.3 percent to 91 cents on the dollar, increasing the yield 6.5 percentage points to 49.633 percent. The hryvnia rose 1 percent to 9.11 per dollar, data compiled by Bloomberg showed.

Economic Pain

Ukraine’s economy is suffering after three months of street protests toppled Yanukovych, killing at least 100 demonstrators and policemen along the way. While Russia halted disbursement of a $15 billion rescue package after Yanukovych fled to Moscow, Europe and the U.S have pledged financial aid.

The European Commission, the European Union’s executive arm, this week outlined an 11 billion-euro ($15 billion) package of loans and grants for the coming years tied to the government in Kiev agreeing on an IMF loan. The U.S. House of Representatives approved a bill to allow $1 billion in loan guarantees for Ukraine sought by the Obama administration.

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Russia said Ukraine must pay off almost $2 billion it owes it for natural gas by today and signaled it may cut supplies, ratcheting up the pressure on its cash-strapped neighbor as the two nations scrap over the future of the Black Sea Crimea region.
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2014-05-07
Friday, 07 Mar 2014 11:05 AM
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