Putin issues warning to Europe about Ukraine gas debt

Dragging much of Europe into his fight with Ukraine, Russian president Vladimir Putin urged European leaders to quickly help Ukraine settle its gas debt to Russia to prevent an imminent shutdown of Russian natural gas supplies to the continent.

Putin issues warning to Europe about Ukraine gas debt

Putin’s letter to 18 leaders, released yesterday by the Kremlin, is part of Russia’s efforts to retain control over its struggling neighbour, which is teetering on the verge of financial ruin and is facing a pro-Russian separatist mutiny in the east.

A large Russian military build-up alongside the Ukrainian border has also raised fears that the Kremlin could use the tensions in eastern Ukraine as a pretext to invade, following Moscow’s annexation of Crimea last month.

Putin’s move raises the spectre of a new gas dispute between Russia and Ukraine that could affect much of Europe. In 2009, Moscow turned off supplies to Kiev, leading to the shutdown of Russian gas moving across Ukrainian pipelines to other European countries.

The amount that Putin claims Ukraine owes is growing by billions every day. In the letter, Putin said Ukraine owes Russia $17bn (€12.24bn) in gas discounts and potentially another $18.4bn incurred by Ukraine as a minimal take-or-pay fine under their 2009 gas contract. He added, on top of that $35.4bn, Russia also holds $3bn in Ukrainian government bonds.

The amount is far greater than the estimated $14bn bailout that the IMF is considering for Ukraine.

Putin warned Ukraine’s mounting debt is forcing Moscow to demand advance payments for further gas supplies.

He warned, if Ukraine failed to make such payments, Russia’s state-controlled gas giant Gazprom will “completely or partially cease gas deliveries.”

Putin told the leaders that a possible shutdown of Russian gas supplies will increase the risk of Ukraine siphoning off gas intended for Europe and will make it difficult to accumulate sufficient reserves for next winter. He urged quick talks between Russia and European consumers of Russian gas to prevent a looming shutdown of supplies.

“The fact that our European partners have unilaterally withdrawn from the concerted efforts to resolve the Ukrainian crisis, and even from holding consultations with the Russian side, leaves Russia no alternative,” Putin said.

He said Russia may decide to help its struggling neighbour “not in a unilateral way, but on equal conditions with our European partners”.

“It is also essential to take into account the actual investments, contributions and expenditures that Russia has shouldered by itself alone for such a long time in supporting Ukraine,” he wrote in the letter.

“Only such an approach would be fair and balanced and only such an approach can lead to success. ”

Putin has been tightening the economic screws on the cash-strapped Kiev government since it came to power in February, after Ukraine’s Russia-leaning president fled the country after months of protest.

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