Europe leans on Ukrainian energy company

Europe reviewing Naftogaz ties to Russia's Gazprom.
By Daniel J. Graeber  |  July 28, 2014 at 10:18 AM
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BRUSSELS, July 28 (UPI) -- A European energy administration agency said Monday the Ukrainian government needs to examine its contractual relationship with Russian energy company Gazprom.

The European Energy Secretariat sent a letter to Ukrainian Energy Minister Yuri Prodan calling for an assessment of the contract between Ukrainian energy company Naftogaz and Gazprom. Parts of the contract, including the take-or-pay clause requiring Naftogaz to pay for a pre-determined volume of gas, serves to "prevent, restrict and distort competition on the natural gas market in Ukraine and affect trade in natural gas within the [European] energy community," the secretariat said in a statement.

Gazprom in June switched Naftogaz over to the new payment scheme because of $4.45 billion in overdue bills.

Russia supplies about a quarter of the European Union's gas needs, though most of those supplies run through the Soviet-era transit network in Ukraine. Debt disputes in 2006 and 2009 prompted Gazprom to cut gas to Ukraine briefly, causing regional energy shortages.

Russia this year offered some concessions to their Ukrainian energy counterparts, though the government in Kiev said it was wary of the Russian intentions. European officials have said the region's energy sector was subject to "political and commercial blackmail."

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