Ukraine Gas Cutoff Deadline Looms

As tensions remain as high as ever on the Ukrainian-Russian border, the former Soviet nation is now facing a looming deadline set by Russian gas company Gazprom for its supply of gas. The deadline of June 9 has already been delayed. Since Ukrainian President Viktor Yanukovich was ousted in February of this year, Russia has significantly hiked the price that Ukraine is paying for its gas. Ukraine is already approximately $5 billion in debt to Gazprom, while racking up a $1 billion debt each month.

With its economy on the brink of collapse and the country nearing bankruptcy, the embattled Ukraine turned to the International Monetary Fund (IMF), the Washington-based lender. The IMF pledged a loan package of $17 billion for the next two years on the condition that Kiev make certain economic reforms including wage freezes, gutting social aid programs, and tax hikes on charges such as household power bills, which could rise as much as 40 percent. $5 billion of the IMF loan would be reserved to pay back the IMF from an earlier loan. The World Bank, European Union, Canada, Japan and the U.S. announced another $15 billion worth of loans to Ukraine.

Ukraine is no stranger to economic recessions with this current depressive state its third since 2008. It is also no stranger to seeking foreign help in times of economic stagnation. In December of 2013, when Yanukovich was still president, Russia agreed to a $15 billion bailout, along with cutting the price of Ukrainian gas sales by a third. After lending the first $3 billion, Russia withdrew the emergency money and gas discount due to the overthrow of the Yanukovich government, which Russian President Vladimir Putin believed was unconstitutional.

In addition to the debt it already owes to Russia, Ukraine also owes interest payments on the $3 billion loan it took from the country while Yanukovich was still in power, which is due in June. New president-elect of Ukraine Petro Poroshenko is slated to be inaugurated on Saturday, just days before the looming gas cutoff deadline. His inauguration will be attended by U.S. Vice President Joe Biden, there to discuss Poroshenko’s agenda.

If Gazprom cuts off the gas supply to the war-torn country, the divided nation will lose over half of its gas supply. The broader implication is that Europe gets a third of its gas from Russia, with half of that gas being channeled through Ukraine. A bill called Ukraine Support Act which would attempt to supply the Ukraine with aid and natural gas was passed in the U.S. House of Representatives, but is currently stalled in the Senate.

The financial crisis in Ukraine is punctuating the bloody conflicts that have been breaking out ever more frequently in the eastern region. After Poroshenko assumed power, he has been much more aggressive with military assaults on separatists than was the previous interim government, which operated since the ousting of Yanukovich and before the presidential elections. Last week, Kiev launched an assault on rebels who attempted to capture a large airport in Donetsk. On Monday, Ukraine’s anti-terror operation opened fire on pro-Russian rebels very near to the Russian border, leaving as many as seven people dead.

As fighting has continued to escalate, killing many ethnic and linguistic Russians, Russia has called for the establishment of humanitarian corridors in eastern Ukraine to help ordinary citizens escape the brutal situation. Russia drafted this resolution and circulated it to a 15-member U.N. Security Council. The draft also calls for an end to the violence in the region. No resolution has yet been made with the draft. The council was comprised of representatives of several Western nations who have, throughout this Ukraine crisis, placed blame on Russia for arming and inciting the separatists in eastern Ukraine. Russia claims no guilt and insists that the uprising occurred autonomously. It also claims that Ukraine’s recent launch of powerful military actions against separatists in the east is only exacerbating the volatile situation.

Ukraine may receive the IMF’s first influx of loan money this month. It is estimated that Ukraine needs $6.2 billion in this second quarter to stay afloat with its debt and to continue purchasing gas. As the June 9 gas cutoff deadline looms nearer, Poroshenko will clearly be very busy in the first official days of his presidency.

By Jesse Eells-Adams

Voice of America

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