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Ukraine PM Says 'Difficult' Russian Bill Settled

Ukrainian Prime Minister Yulia Tymoshenko

Ukrainian Prime Minister Yulia Tymoshenko

KYIV (Reuters) -- Ukraine has paid Russia for October gas supplies on time, despite European Union fears that bills would not be settled but the process had proved "extremely difficult," Prime Minister Yulia Tymoshenko has said.

Tymoshenko said her rival, President Viktor Yushchenko, and the central bank had thrown obstacles in the way of the payment to Russian gas giant Gazprom, reflecting behind-the-scenes struggles ahead of a presidential election due in January.

Her comments in a three-paragraph statement reflect a similar charge made by Russian Prime Minister Vladimir Putin, who in October warned that Yushchenko risked provoking a fresh crisis over gas supplies.

"Today we paid Russia the next $500 million," a statement from Tymoshenko's office cited her as saying. "The Ukrainian prime minister noted that this was extremely difficult to carry out," the statement said and then quoted her as saying.

"Is anyone asking the government how it is paying for gas while there is a full blockade from the side of the central bank and the president, and with the fact that local utilities are paying 50-60 percent of the price of the gas they use?"

The central bank and the president's office have not answered her comments but both said money from the International Monetary Fund would be used to pay for the gas, giving no indication that they wanted to obstruct the transaction.

Tymoshenko and ex-Prime Minster Viktor Yanukovych are front-runners in the first presidential election since the 2004 Orange Revolution. Polls show Yushchenko is unlikely to win.

Russia hopes any victor would adopt more friendly policies after Yushchenko angered Moscow with nationalisation, desire for NATO membership for Ukraine and insistence that the Russian navy vacate a centuries old base in the Crimea.

But Putin's comments that Ukraine may fall behind with its bills chilled European leaders who were shocked by a three-week row in January that left hundreds of thousands in the cold after Russia cut supplies to and through Ukraine.

The EU receives about 20 percent of its gas from Russia via Ukraine. An EU Commission spokesman said on November 6 Ukraine had informed the bloc it has 25 billion cubic meters of gas in storage, enough to avoid disruptions to flows this winter.

Billions More In Fines?

Ukraine is caught in a deep recession and has been surviving on a $16.4 billion lifeline from the International Monetary Fund. But a suspension of the IMF program has raised concerns over how the ex-Soviet state will pay for gas as winter sets in.

Yushchenko reiterated the stance he has assumed since Tymoshenko signed a gas supply deal with Moscow in January -- that the contract was bad for Ukraine and that Naftogaz would find it difficult to settle bills.

He said late on November 5 the company, which is ailing financially and has had to restructure all its foreign debts, could face fines worth $7.8 billion because it has been buying less gas than it promised in the January contract.

This is a warning he has already issued several times. Tymoshenko's answer has been that Gazprom, the world's largest natural gas producer, would not impose any fines and Russian officials have thus far not disputed this.

Naftogaz was not immediately available to confirm it had paid the October bill but had earlier said there were no reasons for any delays in payments to Gazprom.

Unlike last year, Naftogaz has so far paid all its bills on time. But some of the payments involved several transactions -- the central bank has printed money before to loan to state banks who then lent the money to Naftogaz.

The central bank could use its reserves which include about $2 billion from the IMF as part of the fund's $250 billion cash injection to its members in September, Yushchenko said.

The IMF had been due to release $3.8 billion in funds by the end of the year but said it would not do so until a minimum wage increase is overturned. The government was against the wage rises, but parliament and Yushchenko both backed them.