EU to help Ukraine’s energy sector with $1.7-billion loan

International financial bodies and the European Union have agreed to lend Ukraine up to $1.7 billion to reform its energy sector and pay its huge gas bills to Russia to ensure stable supplies of gas to Europe in the coming winter months.

Moscow has been urging the EU to help Ukraine with loans up to $5 billion in order that the gas cuts made to Europe for around two weeks at the height of the winter last year due to Ukraine's inability to clear off Russian gas supplier Gazprom's bills are not repeated. (See: Gazprom to cut off European gas supplies as Russia-Ukraine talks fail)

The European Bank for Reconstruction and Development (EBRD) will lend Naftogaz a sovereign-guaranteed loan up to $300 million to Naftogaz, which will provide working capital for immediate gas storage requirements and longer-term finance to support the rehabilitation and upgrading of Ukraine's gas transit system.

In 2010, EBRD will lend up to $450 million for investment, with no more than $450 million to be committed at any one time.

The Ukrainian Prime Minister Yulia Tymoshenko has committed to the implementation of an ambitious programme of market-oriented reforms to the country's gas sector and the IFI financing, involving the IMF, the World Bank, the EBRD and the European Investment Bank, will support the long-term future of the Ukrainian gas sector with major infrastructure investments linked to the prime minister's programme of reforms.

''Our aim is to improve the sustainability, accountability and above all the transparency of the Ukrainian gas market, to the benefit of both Ukraine and of energy security in all of Europe,'' said EBRD President Thomas Mirow.