AFP, Kiev :
Ukraine’s Western-backed leaders scrambled Friday to find new sources of energy after Russia hiked its gas price by 80 percent in response to the overthrow of Kiev’s pro-Kremlin regime.
The crisis-hit nation saw the amount it must pay for 1,000 cubic metres of blue fuel soar to $485.50 from $268.50 after Russia imposed two price increases in three days that reflected its deep displeasure with the ex-Soviet nation’s new westward course.
Energy Minister Yuriy Prodan called the new rate “political” and vowed to explore solutions that included a heavier reliance on coal-a polluting resource whose consumption has imperilled the air quality of nations such as China.
“We are now reviewing our electricity and fuel balance for 2014 with a view of using as much domestic coal as possible at the expense of natural gas,” Prodan told a cabinet meeting in comments posted on the government website.
Ukraine has relied on coal throughout much of the past century despite efforts by global institutions such as the World Bank to help Kiev phase out its use following independence from Moscow. The International Energy Agency estimates that coal accounts for about 30 percent of Ukraine’s total energy supply compared to the 40 percent of the balance assumed by natural gas.
Rating firm Moody’s again lowered Ukraine’s credit rating by a notch on Friday, citing the “escalation” of its political crisis, and put the country on a “negative” outlook for further downgrades.
Moody’s Investors Service pushed the country’s rating deeper into speculative territory, to “Caa3” from “Caa2”-a one-notch move matching the rating firm’s prior downgrade in January.
Three factors which underlie Ukraine’s longstanding economic and fiscal fragility drove the downgrade, the rating firm said.
The first was “the escalation of Ukraine’s political crisis as reflected by the recent regime change in Kiev as well as the annexation of Crimea by Russia,” it said, noting that Russia, rated Baa1, is being reviewed for a downgrade.
The second was the country’s strained external liquidity, given the continued decline in foreign-currency reserves and the withdrawal of Russian financial support and the rise in gas import prices.
Ukraine’s eroding fiscal strength was the third driver.
The risk of further economic sanctions by Russia was also weighing on Ukraine’s credit rating.
“An escalation of economic sanctions by Russia, with increases in the gas price and potentially escalating to trade restrictions, would also be detrimental to Ukraine’s economic outlook, given that Russia accounts for almost all of Ukraine’s gas imports, and for around 25 percent of Ukraine’s goods exports.
