Kiev, Ukraine. A large number of investments in Ukraine are funded by Chinese banking interests, based upon American guarantees. But recent corruption chaos with state gas concern Naftogaz, may be putting billions of dollars in loans at risk as China decides the Ukraine is one gamble it can pass on.


Ukraine may lose 3.65 billion USD, which the China Development Bank would allocate for the development of the energy sector, referring to interviews with officials.


The reason for the loss of Chinese funds, the agency argues, is the differences between the Ukrainian ministries and the state company Naftogaz of Ukraine, as well as the expiring term for the terms of a specific program for financing.


In June of this year, Ukraine must submit proposals for investment projects in order to receive the announced funding. Nevertheless, the relevant government departments of Ukraine have not signed a single coal or gas project yet that could be financed with a loan from China, the agency notes because of the incompetence of Ukrainian energy officials, unaware of world standards for loan generation.


The loan agreement with China Development Bank was originally signed back in 2012. According to Ukrainian government “experts”, at least one of the projects will be ready in time. However, it is not yet clear whether the China Development Bank will allow Ukraine to access part of the funding if the documents are not in accordance with Chinese standards.


Andriy Suprun, the head of Naftogaz coal and gas subsidiary Uglesintezgaz, is not sure that all the proposals for the Chinese bank will be ready in time, “The sum is huge and the loan is under Ukrainian state guarantee. A project of this size is political so the issue needs a joint position from the Ministries of Economy, Energy and Finance.”


Suprun also confirmed that there is a certain lack of convergence in the positions of Uglesintezgaz and the energy ministry. However, he refused to elaborate on their differences, attempting to avoid further embarrassment for the ministry.


Meanwhile, Ukraine’s Ministries of Economy, Energy and Finance declined to comment on the situation. Deputy Minister of Finance of Ukraine Yuriy Butza noted only that not all the proposals will be ready in time.


“We have every intention to use those funds. I know there is some serious work going on at Naftogaz, so I believe we will see some progress very soon,” he said.


In his opinion, the primary goal is to implement projects that the sector now needs the most, at the expense of the China Development Bank.


“The loan was signed under different conditions, in different times, for different purposes. Our intention is to use the opportunity to finance the projects which are needed at this point in time. The needs have changed much,” he added.


According to the Ministry of Economy, Ukraine must attract at least 7 billion USD from abroad per year to spur economic growth, or Ukraine may default on further international debt obligations.




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