BRUSSELS, March 12 (Reuters) - Ukraine's new President Viktor Yanukovich is likely to bring stability and security to energy relations with Russia, the European Union executive told member countries on Friday.
A briefing paper for EU energy ministers meeting in Brussels highlighted that Yanukovich looked likely to revise existing contracts for delivery of Russian gas to Ukraine and onwards to Europe.
"Energy relations with Russia are nevertheless likely to improve and so far Naftogaz has been able to meet its gas payment obligations," said the report, referring to Ukraine’s state-owned gas company.
Europe has closely watched the relationship between Kiev and Moscow since a pricing dispute in January 2009 cut off supplies to the continent during three weeks of freezing weather.
"The main challenge for the new president will be to seek a solution to the structural and financial difficulties in the gas sector," the report added.
The Commission took a swipe at former Ukrainian prime minister Yulia Tymoshenko for failing to implement gas sector reforms that she had agreed with the EU executive and international financial institutions last July as part of a standby lending package.
"The new Ukrainian president will now need to take urgent steps to improve economic and financial stability by cooperating closely with the IMF to allow for the disbursement of the remaining IMF funds," the report said.
The options for easing troubled east-west energy relations include European businesses storing gas in Ukrainian facilities, splitting Ukraine’s domestic pipelines from transit pipelines to Europe, and creating a consortium to operate the Ukrainian gas transit system.
"None of these options have so far attained sufficient support from all involved — EU and EU gas industry, Russia/Gazprom and Ukraine/Naftogaz," said the report.
"The new president is however now advocating the establishment of a consortium between Ukraine, Russia and the EU for the operation of the Ukrainian gas transportation system."
