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Paying the gas man

June 29, 2009

International lenders have met in Brussels in an attempt to come up with a rescue plan to help Ukraine to pay its upcoming gas bill, avoiding a gas cut off such as the one that left millions in the cold last winter.

Two chairs and two pens await the representatives from Russia and Ukraine with the flags from each nation in the background
This is the second time Russia and Ukraine have come to the negotiating table over gasImage: Olexander Prokopenko

Representatives from the World Bank, the International Monetary Fund (IMF), European Investment Bank and the European Bank for Reconstruction and Development are meeting in Brussels with the vice presidents of Russian gas giant Gazprom and Ukraine's gas monopoly Naftogaz to discuss how to best come up with enough money for Ukraine to pay its upcoming gas bill.

The talks, hosted by the European Commission, are taking place less than a week before Kiev will be expected to hand over three billion euros ($4.2 billion) to Russia for gas that it has started to store for the coming winter.

A dispute over payment earlier this year led to Russia shutting off gas supplies to Ukraine, which affected not only citizens there, but also those living in parts of the European Union which depend on gas coming from pipelines running through Ukraine.

A quarter of all the natural gas burned within the EU comes from Russia, with 80 percent of that flowing through Ukraine, mostly to the south-eastern corner of the continent.

Transparency an issue

A pipe waiting to take its place in the Baltic Pipeline between Russia and Germany
Germany is betting on a pipeline across the Baltic Sea to save itself from these disputes in the futureImage: RIA Novosti

Weighed down by the global financial crisis, Kiev claims it won't be able to come up with the money in time to buy the roughly 20 billion cubic meters of natural gas that it wants, and that has incited the EU to call on the international community to give Ukraine a short term loan.

However, many organizations, including the IMF, aren't convinced that Naftogaz is in a position to receive funding. Ceyla Pazarbasioglu, head of the IMF delegation, told the Reuters news agency that they were demanding that the state-owned gas giant undergo some serious reorganization, adding that the company needed to become more transparent and clean up its finances.

The multibillion euro loan would be part of the IMF's $16.4 billion program to help out nations hit hard by the economic crisis.


Editor: Michael Lawton

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