Ukraine's energy and coal industry ministry signed an agreement with the China Development Bank for a $3.656 billion (€3 billion) credit line to help the country switch its power plants to coal from gas, the Platts energy information service reported. The deal was announced on 13 July.
The Ukrainian National Bank, meanwhile, announced a Chinese loan of $3 billion (€2.46 billion) for agriculture.
Ukraine has the seventh-largest coal reserves in the world, but underinvestment and a lack of progress on deregulation have made the country a net coal importer. The country prefers to import coal to reduce its dependence on expensive Russian gas.
Under a controversial 2009 deal under former Prime Minister Yulia Tymoshenko, Kyiv is paying $425 (€340) per thousand cubic metres for natural gas. Ukraine sees a fairer price at $250 (€200).
Kyiv recently decided to cut Russian gas imports to 27 billion cubic metres (bcm) in 2012 from about 40 bcm in 2011. However, Russia insists on a take-or pay clause, according to which Kyiv has to pay for the gas even if it does not use it.
China is also expected to provide technological expertise for the conversion of the plants from gas to coal. In 2010, Ukraine's energy ministry and China Development Bank signed an agreement, under which the bank agreed to consider investing $1.03 billion (€854 million) in the modernisation of seven state-owned coal mines in Ukraine.
A first for agriculture
The national bank, meanwhile, announced a deal on cooperation in agricultural. Under the deal signed by Ukraine’s agriculture minister, Mykola Prysyazhnyuk, and the vice president of the Export-Import Bank of China, Zhu Hongjie, Ukraine will receive a $3 billion (€2.46 billion) loan for 15 years with an interest rate of 6% with the first five years interest-free.
National Bank Governor Sergei Arbuzov said the arrangement was a first in Ukraine’s relations with China and said it would benefit the country’s farm sector.
"China was flexible and we appreciate it. In return we will supply China with high quality agricultural products," he said.
On 26 June, the National Bank of Ukraine and the People's Bank of China signed a currency swap agreement covering a three-year period. The 15 billion yuan (€ 1.92 billion) deal is intended to help develop trade and investment while maintaining financial stability of Ukraine.