Media: Ukraine could miss out on $3.65 billion loan from China due to squabbles between officials

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

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

In June 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.

The loan agreement with China Development Bank was signed back in 2012.

According to the Ukrainian government, 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 proposals for the full amount are not ready.

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," he said.

Suprun also confirmed that there is a certain lack of convergence in the positions of Uglesintezgaz and the energy ministry. However, he did not elaborate on their differences.

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.

He also believes that before the June deadline at least one project for the Chinese bank will be submitted.

Suprun said that according to plans under consideration Chinese funding will be spent on the construction of two new coal-fired power plants in Kyiv and Lviv, as well as an upgrade of the Naftogaz subsidiary’s drilling rigs.

According to the Ministry of Economy, Ukraine must attract at least 7 billion USD from abroad per year to spur economic growth.

  Ukraine, China, loan