Ukraine agrees to pay part of gas debt

The Ukrainian gas company, Naftonaz, has agreed to pay a portion of the $2.4 billion gas debt it owes to Gazprom by December 1. That is according to officials at the Russian energy giant. The announcement came shortly after Dmitry Medvedev instructed Gazp

However, the Russian President said the government wouldn’t need to get involved as “these are measures that Gazprom itself can carry out.”

Medvedev went on to say that “everything will depend on the mood of our Ukrainian partners.”

“I would like to meet the New Year calmly. For this, however, there are preconditions. The money only needs to be returned to us and then everyone will be in a good mood before the new year,” Medvedev said.

Neither side wants a repeat of the situation in 2005, when Gazprom briefly cut off gas supplies to Ukraine over unpaid debt. A deal was reached five days into the new year.

However, the Russian energy giant has said they will cut off gas on 1 January if the debt isn't settled, and Medvedev, who met with Gazprom CEO Alexei Miller last week, told the company head to levy the debt 'voluntarily or forcibly'.

Gazprom has sent a $US 2.4 billion bill to Kiev, but to add fuel to the fire, the Ukrainian gas company Naftogaz, says that it only owes $1.27 billion. Furthermore, the Ukrainian company says its debt is to a mediator company, of which Gazprom owns 50 per cent, and that it owes nothing to Gazprom proper.

The crisis has sparked a row between Ukrainian president Viktor Yushchenko and prime minister Yulia Timoshenko. Yushchenko has blamed the prime minister for the large debt.

During a visit to Moscow in October, Timoshenko told Medvedev that the debt would be taken care of before the new year. However, recently she has asked for extra time, arguing that Ukraine has already paid for used gas and must only settle a debt for the unused amount.

She said that gas "is already being kept in storage in Ukraine.

The Ukrainian PM said she “would like to ask the Russian side to give us a little delay in paying the debt – just a few months,” Timoshenko said.

Ukraine faces more gas woes in the coming year as Gazprom could more than double the current price.

The International Monetary Fund has promised to lend Ukraine $16 billion to stimulate the economy. However, in light of the financial crisis, it is hard to tell whether Ukraine will see gas flowing come January 1.

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