Ukrainian Prosecutors Say Cheap Gas Intended For Ukrainians Was Sold Instead To Businesses

KIEV, Ukraine -- Ukrainian prosecutors accused a state-controlled gas company of redirecting cheap Ukrainian gas intended for the Ukrainian population to commercial enterprises in a bid to make a higher profit, the prosecutor's office said Friday.

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The latest allegations against state firms in Ukraine's natural gas sector were made amid an investigation that has already led to the opening of 58 criminal cases against Naftogaz and its daughter companies.

The probes are part of the growing tussle between Prime Minister Viktor Yanukovych and President Viktor Yushchenko. Yanukovych has called for management changes at numerous state-controlled gas companies.

The General Prosecutor's Office accused Ukrnafta of selling Ukrainian gas to commercial enterprises at higher rates, forcing the government to buy more expensive Russian-supplied gas for the population. The deals cost the state about 1.3 billion hryvna ($258 million), prosecutors said.

No one from Ukrnafta could immediately be reached for comment. Naftogaz, the parent company, refused to comment.

Russia's Vedomosti newspaper reported that the latest investigation was seen as an effort to change the management at Ukrnafta. Analysts have predicted a battle for control of the gas company between the current minority shareholder, which is affiliated with oligarch Ihor Kolomoysky, and tycoons linked to Yanukovych's Party of Regions.

Earlier this month, prosecutors opened criminal cases against state gas companies, accusing them of issuing licenses illegally, illegally writing off debts, allowing some companies to carry out gas exploration work without licenses and renting state property at below-market prices.

Prosecutors have also launched probes into the former leadership for alleged financial breaches. Former Naftogaz head Oleksiy Ivchenko, a Yushchenko ally, has denied the allegations.

Ukraine produces about 20 billion cubic meters of its own gas, which is supposed to be directed to the population in a bid to keep prices low. But that covers only about 20 percent of its needs, forcing Ukraine to rely on more expensive Central Asian gas, which it pipes in via Russia.

Earlier this year, a bitter pricing dispute between Russia and Ukraine led to the temporary shut-off of gas supplies and a sharp increase in prices.

Source: AP