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Ukraine energy minster calls to end Naftogaz privatization ban

May 1, 2013 at 12:04 AM

KIEV, Ukraine, May 1 (UPI) -- Ukraine's Parliament needs to lift a ban on the privatization of natural gas transmitter Naftogaz to tap its potential, Energy Minister Yuriy Boyko says.

In a interview with the Mirror Weekly newspaper Friday, Boyko -- who is also Ukraine's vice prime minister -- said the privatization of Naftogaz would "attract substantial funds" for the cash-strapped transmission system operator, allowing it to carry out much-needed upgrades.

The comments came hours after the Council of Ministers proposed a bill to lift a 2012 ban on selling shares in Naftogaz subsidiaries such as Ukrtransgaz, which manages the system.

Boyko said the legal structures are already in place to quickly privatize and spin off parts of Naftogaz -- a goal the European Union is seeking as part of its push to end the vertical cross-ownership of energy resources and transmission infrastructures.

All that is needed, he said, is Parliament's vote to roll back the ban.

Such a move, however, is bitterly opposed by opposition parties, who fear it would lead to the takeover of one of the country's greatest assets by Russia's Gazprom.

"We have created (joint operating companies,) and sent the law to the Verkhovna Rada (Ukraine's Parliament) to lift the ban on privatization," he said. "After privatization, the company will be really divided."

Boyko said the move would make the company less opaque -- another EU goal -- and also revealed some of the funds raised through an offering of Naftogaz subsidiaries would be used to pay foreign creditors.

"Privatization is recommended by our consultants Ernst and Young," he said. "(It) would increase transparency and allow us some money received from privatization to be directed to repayment of western loans," he said.

A move to privatize Ukrtransgaz is seen by some analysts as a bid to attract Gazprom into a 50-50 joint venture, which if achieved, would ensure that Russia continues to use the Ukrainian system as a transit to the lucrative EU market while Ukraine continues to have a say in its operation.

Gazprom is working on new gas transit systems such as South Stream that would bypass Ukraine altogether, avoiding the seemingly endless disputes and political wrangling between the two sides.

The Russian company has said that should it buy Naftogaz in its entirety, it would reduce the gas prices it charges Ukraine -- which are among the highest in Europe. But whether it would be interested in a 50-50 ownership stake is unclear, the British energy analysts ICIS Heren reported.

Meanwhile, a government push to lift the privatization ban would likely cause a political crisis in the Verkhovna Rada, a Ukrainian political scientist said Monday.

Volodymyr Fesenko, chairman of the Penta Center for Applied Political Studies, told the Ukrinform News Agency the bill would be "very conflictive" and would result in bitter political fights leading to "a parliamentary crisis."

"This is an attempt to create certain preconditions for reaching a compromise with Russia and fulfillment of the European Union requirements on the energy policy and solution of internal financial problems," he said.

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