Ukraine Fears Energy Crisis This Winter

KIEV, Ukraine -- Ukraine may still face an energy crisis this winter, Deputy Prime Minister Andriy Klyuev said on Thursday, Aug. 17, despite assurances from Russia that it will not sharply raise the price of gas supplies to its neighbor.

Klyuev, who oversees the energy sector, chaired a government meeting to discuss preparations for winter and avoid a repeat of a gas crisis that hit Ukraine and Europe in January when Russia cut supplies to Kiev due to a pricing row.

“We can clearly state that we have a gas deficit of about 8 billion cubic meters. We have difficulties with gas supplies, payments, with the financial situation at (state oil and gas firm) Naftogaz and other energy companies,” Klyuev said, quoted by Reuters.

Prime Minister Viktor Yanukovich, who favors closer ties with Russia and was appointed earlier this month after a fierce tug-of-war with pro-Western factions in parliament, won Moscow’s word on Wednesday, Aug. 16, that there will be no big hikes in gas price just yet.

But Yanukovich has also said more talks on gas supplies for 2007 could be held in November or December.

At the start of the year Ukraine was forced to accept a nearly two-fold increase in prices for Russian gas as Russian natural gas monopoly Gazprom cut supplies for several days in a move that affected many European customers.

Ukraine is a key transit route for Russian gas to Europe. Kiev now pays $95 per 1,000 cubic meters of gas compared with $50 previously.

The new price is paid for a mix of Russian natural gas and much cheaper supplies from Turkmenistan. But Turkmen gas supplies have been erratic so far this year, with the Turkmen side demanding Kiev pay $100 per 1,000 cubic meters instead of $60.

Gazprom, in its turn, has said that gas prices for Ukraine could go up to as high as $230 next year.

Ukraine’s economy with its energy-guzzling heavy industry needs gas prices not higher than $150 to keep going, analysts say.

“Prices could be hiked to over $150 depending on what happens in negotiations with Turkmenistan,” Tim Ash from Bear Stearns in London said in a research note.

“Obviously over $150 for gas suggests a significant hit to the Ukrainian economy, particularly chemicals. Ukraine’s ability to ride through this will depend on whether international metals prices hold up sufficient to let the Ukrainian industry invest... to cut energy consumption.”

Source: MOS News