KIEV, July 17 Ukraine state oil and gas company
Naftogaz is seeking to extend by five years the term
of a $2 billion loan from Russia's Gazprombank,
which fell due last month, the company said on Wednesday.
Naftogaz imports Russian gas and sells it to domestic
households and heating companies for much less under a system of
state subsidies. Naftogaz also tranships a large share of
Russian gas bound for Europe.
It was originally due to repay the loan on June 24 but has
instead started negotiations on rolling it over.
On Wednesday, Naftogaz said in a statement it wanted to have
the term of the loan extended by five years. It did not provide
any other details.
The policy of subsidising household gas and heating prices
forces the government to spend money on covering losses incurred
by Naftogaz and thus increase the budget deficit.
The International Monetary Fund - from which Ukraine is
seeking a new $15 billion loan - has long urged Kiev to drop the
subsidies in order to reduce deficit and avoid building up debt.
But the issue is politically sensitive as an increase in
utility prices would badly damage the already flagging
popularity of President Viktor Yanukovich's government.
Instead of that, Ukraine has been trying for months to
renegotiate its current gas deal with Russia, seeking a lower
price. But the talks have so far failed to yield any tangible
(Reporting by Natalia Zinets; writing by Olzhas Auyezov;
editing by James Jukwey)