Hungary’s gas pipeline operator has suspended delivery of gas to Ukraine “indefinitely”.
Ukraine has been receiving gas from Hungary, Poland and Slovakia since Russia cut off supplies to Ukraine in June in a dispute over unpaid bills.
Ukraine’s state-owned gas firm, Naftogaz, confirmed the stoppage. It called the move “unexpected and unexplained”.
The pipeline operator, FGSZ, said it cut deliveries to Ukraine to raise the flow of gas to Hungary.
Hungary’s gas pipeline operator has suspended delivery of gas to Ukraine indefinitely
With winter approaching fears are mounting that Ukraine will be unable to heat homes and power industry without Russian gas.
On September 26, Russian and Ukrainian energy ministers are meeting in Berlin for European Union brokered talks, aimed at heading off such a crisis.
Hungary said the stoppage late on Thursday was for technical reasons and because it expected Hungarian demand for gas imports to increase.
It comes three days after a meeting in Budapest between the head of Russian gas giant, Gazprom and Hungary’s PM Viktor Orban.
PM Viktor Orban has been critical of EU sanctions on Russia and has maintained a closer relationship with Moscow than his western European neighbors.
Earlier this year Gazprom and Russian President Vladimir Putin warned of consequences if EU member states went ahead with deliveries to Ukraine.
Ukraine’s interim government has decided to raise gas prices for domestic consumers by 50% in an effort to secure an International Monetary Fund (IMF) aid package.
An official at Ukraine’s Naftogaz state energy company said the price rise would take effect on May 1st, and further rises would be scheduled until 2018.
Ukrainians are accustomed to buying gas at heavily subsidized rates.
But the IMF has made subsidy reform a condition of its deal.
Ukraine currently buys more than half of its natural gas from Russia’s Gazprom, and then sells it on to consumers at below market prices.
Ukraine’s interim government has agreed to raise gas prices for domestic consumers by 50 percent
Yury Kolbushkin, budget and planning director at Naftogaz, told reporters that gas prices for district heating companies would also rise by 40% from July 1st.
IMF negotiators are still in Kiev to negotiate a package of measures worth billions of dollars to help Ukraine’s interim government plug its budget deficit and meet foreign loan repayments.
The IMF is also asking Ukraine to crack down on corruption and end central bank support for the Ukrainian currency.
On Tuesday, Ukraine’s finance minister Oleksandr Shlapak said the country was seeking $15-20 billion from the IMF.
The Financial Times has reported that a rescue package worth about $15 billion is close to being agreed, and could be announced as early as Thursday.
An agreement with the IMF is necessary to unlock further financial support from the EU and US.
Financial help is urgently required as Ukraine has been forced to plunder its foreign currency reserves, and the economy is expected to contract by 3% this year, according to the country’s finance ministry.
In the US, arguments in Congress over reforms to the IMF have held up plans to offer Ukraine $1 billion in loan guarantees.
The EU says its financial support, potentially worth 1.6 billion euros is contingent on the IMF deal being agreed.
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