European Union: Ukraine Needs Help To Avert New Gas Crisis

BRUSSELS, Belgium -- The European Union will not help Ukraine pay for Russian gas imports but international financial institutions may help avert a looming crisis, European Commission President Jose Manuel Barroso said.

European Commission President Jose Manuel Barroso listens to questions during a media conference at an EU summit in Brussels, June 19.

"That is not our responsibility, I should make that clear," Barroso told reporters when asked about EU help at a summit of leaders on Friday.

Barroso warned heads of state that Ukraine's financial difficulties might lead to Russia cutting off gas supplies next month, including gas intended for transit to Europe, just as it did in January during a mid-winter pricing dispute.

"There is the risk of another major gas crisis in weeks," he later told reporters.

Russia supplies about 25 percent of EU gas consumption and about 80 percent of those supplies flow to Europe through Ukraine's pipeline network.

Barroso told leaders he spoke on Thursday with international agencies including the International Monetary Fund and European gas companies to find a way through the impasse.

"IFIs (International Financial Institutions) and the European gas companies said they were willing... to help provide stop-gap funding," he said, according to speaking notes seen by Reuters.

Separately, Ukrainian Prime Minister Yulia Tymoshenko said individual consumers were paying 85 percent of their gas bills but local energy and utility companies were paying no more than 30 percent, aggravating the debts of state gas company Naftogaz.

"How can the government and Naftogaz do conjuring tricks in settling accounts with Russia for gas when within the country there are 26 billion hryvnias ($3.4 billion) in debts for gas?" she told local officials in Ukraine.

"That is the total which is to be paid for gas which we consume for the whole year and the figure is rising every month, and turning into a national tragedy."

Naftogaz says it will struggle to pay future bills and needs to raise credits worth about $4.2 billion, which it hopes will come from European banks.

But it also says large-scale borrowing can be avoided if European gas companies buy gas from Russia and store it in Ukraine to help avert a new crisis.

German utility RWE expressed interest in Ukraine's idea and said it had put proposals on the table. But Germany's biggest gas company, E.ON Ruhrgas, ruled such plans out.

European industry group Eurogas said it was still consulting its members and could not yet gauge their response.

Source: Kyiv Post