Ukraine's leading English-language newspaper since 1995

KYIV, Nov 20 - President Leonid Kuchma said at a meeting with students at the Shevchenko National University last week that the government made a mistake when it decided to pay for Russian gas exclusively in cash this year.

"It has to be admitted that the decision to pay in cash was a mistake. Ukraine cannot pay in cash - there isn't enough," Kuchma said.

Kuchma noted that this decision has given rise to a Hr 1.5 billion shortfall in payments for consumed fuel and has depleted the working capital of enterprises.

"Plants are putting their production into storage. And they could have used that production to pay for gas," he said.

The Ukrainian government has up to now not announced officially that it decided to pay for Russian gas exclusively in cash, the report said.

Prime Minister Viktor Yushchenko and Russian counterpart Mikhail Kasyanov held talks in Moscow on Friday, November 17 on mechanisms to settle for Russian gas and the size of Ukraine's gas debt.

According to the Fuel and Energy Ministry, Ukraine currently imports 100-120 million cubic meters of Gazprom gas and 60-70 million cubic meters of Itera gas daily.

Ukraine imports around 50-55 billion cubic meters of Russian gas a year, including 30 billion cubic meters received in payment for transit of Russian gas to Europe.

Generating companies buy gas for $45 per 1,000 cubic meters, with payment of $5 deferred for four months, according to the report.