Russia Wants Equity in Firms To Pay Off Ukraine's Gas Debt

KIEV -- Russia, owed more than a billion dollars by Ukraine for supplies of natural gas, is eyeing stakes in some of the former Soviet republic's plum enterprises as a way of recovering part of the debt.

A Ukrainian delegation due in Moscow on March 5 is expected to haggle over the $1.2 billion in debt owed for gas deliveries last year and for the period 1991 to 1994.

Russian officials Tuesday suggested one way out for Ukraine was to give up equity in its run-down energy business.

In remarks addressed to Ukraine, Russian First Deputy Prime Minister Boris Nemtsov told an energy meeting in Moscow, "If you can't give us cash, then give us equity."

Ukraine is the largest consumer and conveyor of Russian gas. It consumes 52 to 53 billion cubic meters of Russian gas annually and transports about 120 billion cubic meters to the West via pipelines across its territory.

Russian Prime Minister Viktor Chernomyrdin discussed the debt problem with Ukraine's leadership last week in Kiev, but there was no conclusive agreement.

Pressure is growing on Ukraine to pay debts and to increase its cash payments. So far, the lion's share of repayments has been made in Ukrainian-produced steel pipes, energy equipment, chemicals and agriculture products.

Nemtsov said Moscow was losing patience with Ukraine over non-payments for gas.

"If you won't pay, you won't be supplied," Nemtsov said during a meeting with energy officials in Moscow on Tuesday. "It should be established once and forever. If there's no money, give up your property."

Russian Deputy Prime Minister Yakov Urinson said in Kiev on Tuesday that Russia would participate widely in the privatization of Ukraine's energy businesses.

Alla Yeremenko, energy commentator at the weekly Zerkalo Nedely newspaper, said Russian energy businesses already have claims on six of Ukraine's oil refineries, on underground gas storage, pipelines and steel mills.

Reformist deputy to the Ukrainian parliament Serhiy Terekhin warned, "There's a threat to Ukraine's national security if our economy's diamonds are handed to the Kremlin's New Russians [businessmen]."

But Ukraine has little option except to take Russian gas, though several alternatives are being looked at.

A feasibility study on the construction and finance of a pipeline from Scandinavia to the Baltic states and Poland, with a possible extension to Ukraine, is scheduled to be completed in two years.

On Tuesday, the Central Asian state of Turkmenistan and Anglo-Dutch oil giant Royal Dutch/Shell signed a memorandum of understanding to build a $4 billion gas pipeline to Turkey and on to Europe via Iran.