Putin Threatens Europe With Gas-Shipment Halt to Ukraine on Debt

Russia will have to halt natural gas shipments to Ukraine, which can affect transit to Europe, unless European governments agree to “actions to stabilize Ukraine’s economy and to ensure delivery” of the fuel, President Vladimir Putin said.

Gas export monopoly OAO Gazprom (GAZP) will be forced to switch Ukraine to prepayment on gas shipments and “in the event of further violation of the conditions of payment, will completely or partially cease gas deliveries,” Putin said in a letter to 18 European heads of state today, according to a copy received by e-mail from the Kremlin press service.

This increases the risk of disrupting gas transit to Europe, according to Putin.

“Undoubtedly, this is an extreme measure,” he said. It “may make it difficult for Ukraine to accumulate sufficient gas reserves for use in the autumn and winter period.”

Russia has provided Ukraine’s economy with $35.4 billion of subsidies in the past four years, including $17 billion in gas-price subsidies and $18.4 billion in the form of a a take-or-pay fine for contracted amounts the Ukrainian side failed to buy, Putin wrote.

“What about the European partners?” Putin wrote. “Instead of offering Ukraine real support, there is talk about a declaration of intent. There are only promises that are not backed up by any real actions.”

While Russia is “prepared to participate in the effort to stabilize and restore Ukraine’s economy,” it’s “essential to take into account the actual investments, contributions and expenditures that Russia has shouldered by itself alone for such a long time in supporting Ukraine,” according to Putin.

To contact the reporters on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net Leon Mangasarian

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