Putin makes a play for Ukraine's money from international loans

  • Article by: VLADIMIR ISACHENKOV and NATALIYA VASILYEVA , Associated Press
  • Updated: April 10, 2014 - 7:54 PM

U.S. condemned effort to “use energy as a tool of coercion against Ukraine.”

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Coal miners raised their hard hats Thursday as they cheered pro-Russian demonstrators who are occupying the regional administrative building in Donetsk, Ukraine.

Photo: Mauricio Lima • New York Times,

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– Vladimir Putin warned Europe on Thursday that it may face a shutdown of Russian natural gas supplies if it fails to help Ukraine settle its enormous Russian gas bill — a debt that far exceeds a bailout package offered by the International Monetary Fund.

The Russian president’s letter to 18 Eastern European leaders aimed to divide the 28-nation European Union and siphon off to Russia the billions in loans that the international community plans to give Ukraine.

It was all part of Russia’s efforts to retain control over its struggling neighbor, which is teetering on the verge of financial ruin and facing a pro-Russian mutiny in the east.

Putin’s message is clear: The E.U. has tried to lure Ukraine from Russia’s orbit and into its fold, so it should now foot Ukraine’s gas bill — or face the country’s economic collapse and a disruption of its own gas supplies.

The warning raises the ante ahead of international talks on settling the Ukrainian crisis that will bring together the United States, the European Union, Russia and Ukraine.

The U.S. State Department on Thursday condemned what it called “Russia’s efforts to use energy as a tool of coercion against Ukraine.”

Hundreds of pro-Russian protesters — some armed — were still occupying Ukrainian government buildings in Donetsk and Luhansk. And in northwest Romania, U.S. and Romanian forces began a week of military exercises.

The amount that Putin claims Ukraine owes is growing by billions every week, and his letter raises the specter of a new gas dispute between Russia and Ukraine that could affect much of Europe. In 2009, Moscow turned off gas supplies to Kiev in the dead of winter, leading to freezing cities across Eastern Europe as Russian gas stopped moving through Ukrainian pipelines to other nations.

In the letter, Putin said Ukraine owes Russia $17 billion due to the termination of gas discounts and potentially another $18.4 billion as a take-or-pay fine under their 2009 gas contract.

The total is greater than the estimated $14 billion to $18 billion bailout that the International Monetary Fund is considering for Ukraine.

Putin told the leaders that a shutdown of Russian gas supplies will increase the risk of Ukraine siphoning off gas intended for the rest of Europe and will make it difficult to accumulate sufficient reserves to guarantee uninterrupted delivery to European customers next winter.

The letter was addressed to 18 countries, including Serbia and Bulgaria, which both rely on Russia for about 90 percent of their gas supplies.

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