VZCZCXRO2642
RR RUEHAG RUEHAST RUEHDF RUEHDH RUEHHM RUEHIK RUEHLN RUEHLZ RUEHMA
RUEHPB RUEHPOD RUEHROV RUEHSL RUEHSR RUEHTM RUEHTRO
DE RUEHBS #0904 1811556
ZNR UUUUU ZZH
R 301556Z JUN 09
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUCNMEU/EU INTEREST COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEHKV/AMEMBASSY KYIV
RUEHMO/AMEMBASSY MOSCOW

UNCLAS BRUSSELS 000904 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EPET EUN
SUBJECT: EU - CONCERNS LESSENING OVER RUSSIA/UKRAINE GAS 
SITUATION, BUT LOANS SLOW IN MATERIALIZING 
 
Sensitive but Unclassified - not for Internet distribution. 
 
¶1. (SBU) Summary.  The EU is looking to provide near-term 
economic relief to Ukraine help it meet its gas payments. 
The funding, most likely in the form of an EBRD loan, would 
not be available before late September or early October, and 
would be contingent on the implementation of reforms in 
Ukraine's gas sector.  End Summary. 
 
¶2. (SBU) On June 29, EU officials convened a conference to 
discuss Ukraine's inability to make its gas payments.  The 
conference was attended by officials from the European 
Commission, the Czech Republic, Sweden, Ukraine, Russia, 
international financial institutions (IFIs), and 
representatives from Gazprom, Naftohaz and European energy 
companies.  The conference consisted of a series of separate 
meetings between the participants, but according to one 
source, a plenary of all parties was not convened. 
 
¶3. (SBU) According to the source, the Ukraine delegation, led 
by DepFinMin Umansky, responded to questions from the 
Commission and IFIs regarding the volume of gas in storage, 
additional volumes needed, and Ukraine's ability to pay for 
the gas. When asked whether arrangements could be made with 
Russia to pay for the gas, the Ukrainians replied "no." 
 
¶4. (SBU) The Commission proposed a two billion euro loan to 
be financed by the European Bank for Reconstruction and 
Development and or the European Investment Bank.  The funds 
would not be available until late September or early October 
and are subject to three conditions: (1) Ukraine's answers to 
additional questions to be posed by the IFIs on its capacity 
to repay the loan; (2) Ukraine's commitment to implement a 
series of reforms; (post is working to obtain a copy of the 
list of reforms) and (3) the deployment of monitors to 
monitor Ukraine's gas storage.  The Commission suggested the 
parties reconvene in two weeks to continue the discussion. 
 
¶5. (SBU) According to the source, the Ukraine delegation 
described the proposal as "alarming" in that it provides no 
relief over the next three months.  Ukraine owes 
approximately USD 600 million each month, but Naftohaz's 
revenues are only USD 150-170 million.  Hughes Mingarelli, 
Deputy Director General for RELEX reportedly replied: "talk 
to the Russians," who in turn suggested Ukraine form a 
consortium with European gas companies to manage its network. 
 
¶6. (SBU) According to a member of Piebalgs's staff, the 
Energy Commissioner is optimistic that a gas crisis will be 
avoided in July.  Piebalgs met with Gazprom's deputy CEO 
Alexander Medvedev on the margins of the conference. 
Piebalgs supports the creation of a consortium of Russian, 
Ukrainian, and European companies to manage Ukraine's 
infrastructure, but others in the Commission (most likely 
RELEX) are opposed. 
 
¶7. (SBU) In a separate conversation, a representative from 
RWE said its proposal to provide short-term relief by forming 
a consortium of European companies was discussed at length, 
but did not receive any support.  (He suspects other energy 
companies felt slighted because RWE did consult with them 
first.)  He said no other proposals were submitted, but that 
Piebalgs was pressing hard for an EBRD loan.  He added that 
RWE is skeptical about the 3-way consortium, but that E.On 
and Gaz de France are considering the proposal. 
Murray 
.