Ukraine's retail gas prices may have to rise 40% as part of economic reforms needed to unlock loans from the International Monetary Fund, Ukrainian energy minister Yuriy Prodan told reporters in Brussels Thursday.
"This is an unpopular reform...an extraordinary measure needed to get out of the crisis," Prodan said.
Ukraine would need real support from the international community to start developing the economy, he added.
The EU has said that its proposed Eur11 billion ($15 billion) financial aid package to Ukraine is conditional on Ukraine implementing economic reforms agreed with the IMF and the gas sector reforms agreed under Ukraine's energy community membership.
Prodan said there was an IMF mission in Ukraine assessing the situation, and he could not say yet when the price rises would start.
"We are short of time to have a smooth price rise. It has to be done urgently, it's the only thing to relaunch the economy," he said.
TRANSIT NEEDS UP TO EUR3 BILLION
Prodan said it would cost at least Eur1 billion and up to Eur3 billion over several years to modernize Ukraine's gas transit system, which currently carries about half of Russia's gas exports to the EU.
"Ukraine's energy sector is in a bad condition now. Very little has been done to improve it over the past four years," he said.
Ukraine plans to apply market principles and EU energy market rules, as required by its energy community commitments, Prodan said.
EU energy commissioner Gunther Oettinger told reporters Thursday that the EU remains committed to helping Ukraine modernize its gas transit system and reform its gas sector.
"We have to convince Ukrainians that this path to a market-based economy will lead to a be tter quality of life in the medium and long term," Oettinger said. He said the EU was ready to co-finance modernizing Ukraine's gas transit system up to "some hundreds of million euros" over the next two to five years, once it has "a clear technical analysis of what has to be invested."
This would be as part of a package with other EU financial institutions such as the European Bank for Reconstruction and Development and the European Investment Bank, he said.
