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. Last Updated: 07/27/2016

Ukraine Promises to Pay Fuel Debt

-- Ukraine President Leonid Kuchma promised Russian gas officials on Tuesday that Ukraine would pay its huge energy debt to Moscow, a presidential spokesman said.

"Ukraine is firmly committed to paying off all its debts to Russia for energy," Mykhailo Doroshenko quoted Kuchma as telling Russian officials from the giant Gazprom concern.

Gazprom officials were in Kiev for talks on averting threatened cuts in supplies to Ukraine because of unpaid debts of more than two trillion rubles ($950 million).

Gazprom warned Ukraine it could cut off supplies by Sept. 1 if the oustanding debt were not paid.

Gazprom Chairman Rem Vyakhirev told the Ukrainian side that Russian demands included pre-payment by Ukrainian consumers and the opening of a Gazprom account in the Ukrainian central bank, the Ukrinform news agency said.

The Russian side also wanted some of the debt for Russian gas to be converted into property and ownership in Ukrainian enterprises, the agency reported.

The Ukrainians were preparing a long-term contract for Russian transit of gas through Ukraine, the agency said.

They also said Gazprom owed Ukraine $367 million in transit fees.

The two sides are scheduled to sign a protocol on Wednesday.

Kuchma ordered the government to come up with the means to start payments and agreed with Russian proposals for Ukraine to pay off some of its debt with shares in Ukrainian gas and oil enterprises, Doroshenko said.

Kuchma said privatising the Lisichansk oil refinery in eastern Ukraine should be a priority.

But he balked at proposals to privatise pipelines carrying Russian oil and gas through Ukraine to Western Europe, Doroshenko said.

Ukraine's parliament this month ruled out privatizing the pipelines.

Doroshenko said the Russian officials would discuss the issue of constructing housing for Russian energy-sector employees during two days of talks with the Ukrainian government and the State Committee on Oil and Gas.

Gazprom officials on Monday said Ukraine had not taken sufficient steps to ensure payments were made after an agreement between the two former Soviet republics led to restoration of supplies in April.

That agreement followed sharp supply cuts and accusations by Gazprom that gas intended for Western European customers was being siphoned from pipelines crossing Ukrainian territory.

It also called for Kiev to clear some of its debt with shares in privatized gas storage and transport facilities.

But Ukrainian authorities have not yet approved Gazprom's participation in privatization.

Gazprom threatened Kiev with a complete cut-off earlier this year, raising the prospect of severe disruptions to western European consumers.

More than 90 percent of Russian gas exports to Western Europe cross Ukraine.