You're reading: China to assist Ukraine with $3.6 billion for energy projects

China is ready to lend Ukraine $3.6 billion for various projects in its energy sector that will reduce the country's dependence on the Russian gas, Energy Minister Volodymyr Demchyshyn said on Feb. 23.

However, there was no immediate confirmation from the China side or any
details about the loan.

“Our delegation just arrived
from China where we met with representatives of the Ministry of Commerce and
the China Development Bank,” Demchyshyn said, according to Zerkalo Nedeli
newspaper, which broke the story on its website. “The representative of
each organization affirmed the readiness to provide a loan for our
projects.”

Ihor Didenko,
Ukraine’s deputy minister of energy, said that the China Development Bank and
Ukraine’s Naftogaz signed a $3.6 billion credit line contract. Didenko said
that the portfolio includes such projects as coal gasification in Odessa’s Port
Plant, nine thermal power stations, the Poland-Ukraine gas pipe interconnector,
environmentally friendly equipment and upgrades in Ukrgazvydobuvannya, an oil
and gas company.

“Even all of
the projects did not come up to $3.6 billion… We calculated it is roughly
around $2.5 billion,” Didenko told the Kyiv Post.

Additional
projects to fill in the remaining $1 billion are still on the table for
consideration.

“We now need to
start the real processes with the Chinese. And the quickest one could be
drilling equipment,” explained Didenko.

Whether China’s assistance will make Ukraine to be
more independent from Russia depends on what the money will be used for,
experts say.

Yuriy Korolchuk, an energy expert, said that two years
ago China was ready to provide a loan for building the coal gasification plant
and is still willing to do so. Gasification of coal is one of the alternatives
to buying the blue fuel from Russia, whose aggression brought war to Ukraine’s
coal-rich Donbas region.

However, Dragon Capital’s energy analyst Denys Sakva
said that given Russia’s war against eastern Ukraine, the region from which
most of Ukraine’s coal is extracted, there’s little sense in importing coal to
run such plants. “We will have to import significant volumes of coal from
Russia and so no energy supply diversification will be achieved.”

Last year, Ukraine consumed 42 billion cubic meters of
gas, while only a half of it was produced domestically and 14.5 billion cubic
meters purchased from Russia’s Gazprom, two times down year-on-year.

Now, Prime Minister Arseniy Yatsenyuk takes pride that
Ukraine buys more gas from the European Union, through a reverse flow, than
from Russia.

Coal-based electricity producers used to cover 48
percent of the nation’s needs in electric power, while the nuclear plants
covered 46 percent.

Since the war in the Donbas started, Ukraine can’t get
the coal from Donetsk and Luhansk oblasts – it is still being produced, but the
railways for deliveries are ruined. Obviously, the separatists are not a
reliable partner for any business deals, though they’ve been saying they can
supply coal to the Ukrainian power plants.

Now, Ukraine has to import coal from abroad, while it
also considers an option of importing the electricity. Previously, it used to
export both, coal and electric power.

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].