The authorities return natural gas price regulation amid public protests

UKRAINE - In Brief 14 Jan 2021 by Dmytro Boyarchuk

The Cabinet returned price regulation for natural gas on January 13th. The decision was delivered on the heels of mass protests against tariffs’ increase. From January 2021 many gas distributing companies have increased natural gas prices for customers, substantially on the back of growing prices for hydrocarbons. This surge translated into a public uproar. President Volodymyr Zelenskiy reacted promptly and requested the Cabinet to cut tariffs promptly. As a result, the Cabinet limited natural gas prices for households at the level of UAH 6 990 per tcm (excluding transportation and distribution fees) until the end of heating season. Acting Minister of Energy Yuriy Vitrenko allegedly called the IMF to explain the decision (since it contradicts market-based pricing principles). Pro-government speakers insist the decision is temporary, and Ukraine will return to market prices after the heating season ends. Also they indicate that many gas distributing companies manipulated prices since the natural gas market is not acting properly, which resulted in protests. We do not know how the IMF will treat this move. Every government promises to regulate prices temporarily, hoping prices will drop at some point. However, the Fund might give a discount for COVID-19 and the new lockdown, which started on January 8. Anyway the move is expected to complicate the program review on the top of the already compiled "discussion points", such as anti-corruption, the constitutional crisis, COVID-19 Fund use and hryvnia printing for deficit funding.

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