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Ukraine slashes natural gas use as subsidies phased out, prices pushed up

Ukraine slashes natural gas use as subsidies phased out, prices pushed up

KIEV: Ukraine has reported a one-third drop in its use of natural gas and general energy savings that will be cheered by its financial backers from the International Monetary Fund. The IMF has long identified Ukraine as one of Europe’s most inefficient countries when it comes to fuel consumption. A large part of the problem came from state subsidies that homes and enterprises had been awarded since Soviet times. That assistance was a vast drain on the budget and allowed Ukrainians to use gas cheaply and without conservation. This all changed last year as the government started to push up prices levied on home users. Many people saw their gas and energy bills double — a change that prompted some protests on the streets. Prices on companies had gone up even earlier. Data released by Ukraine’s main energy transport company showed gas use falling by 32.7 percent last year.

Ukraine has not imported any blue fuel from Russia in 13 months because of a freeze in ties between the two neighbours and disputes over prices. Most of the imports came from Slovakia. Ukraine also imported much smaller amounts from Hungary and Poland. The IMF has long demanded energy savings to be part of Ukraine’s austerity measures that were approved when the Fund awarded cash-starved Kiev a $17.5-billion (16.7-billion-euro) rescue package last year.

Ukraine’s state energy company said last week that it could survive the winter without purchasing any Russian gas. Brussels is still trying to find a compromise between Kiev and Moscow that would reduce Ukraine’s demand from EU countries and lower prices for European consumers. Yet some analysts noted that the gas consumption figure was not all good news. Ukraine’s economy shrank by nearly 10 percent last year and output at the country’s giant steel and chemical companies fell by even greater amounts. The reduced production meant that companies used less natural gas for conversion into energy. The Ukrainian economy is budgeted to grow by three percent this year and analysts will be watching closely to see what that does to gas consumption. A continued decline would mean that industries and homes really are being more efficient. A rise in gas use would imply that neither have done as much to cut down on wasteful consumption as the IMF had hoped.