Ukraine Coal Exports Part of Trump Bid to Counter Russia

(Bloomberg) -- A Pennsylvania company will send 700,000 tons of coal to Ukraine in a deal the administration of President Donald Trump heralded as an important tool to undercut the power Russia has over its European neighbors.

While Trump has pledged to improve ties with Russian President Vladimir Putin, his administration says it's trying to use more U.S. exports of coal, natural gas and oil to curtail Putin's sway with Russian natural resources. Ukraine had been reliant on Russia for much of its oil and gas, and its domestic thermal coal supply collapsed because much comes from the rebel-controlled eastern part of the nation.

"In recent years, Kiev and much of Eastern Europe have been reliant on and beholden to Russia to keep the heat on," Energy Secretary Rick Perry said in a statement announcing the coal-export deal. "That changes now. The United States can offer Ukraine an alternative, and today we are pleased to announce that we will."

At a ceremony in Kiev Monday, Pennsylvania-based Xcoal Energy & Resources LLC announced an agreement with Ukraine power generator Centrenergo PJSC to supply the 700,000 tons for this winter season. Ukraine's initial purchase for 210,000 tons will be at a price of $113 a ton, Oleh Kozemko, acting chief executive officer of Centrenergo, told reporters during a press conference in Kiev. 

Regrettable Act

"They don't want to rely on the Russians, so they are required to import it from somebody," said Barry Worthington, executive director of the independent United States Energy Association.

The U.S. and Russia have had an up-and-down relationship since Trump took office. The U.S. intelligence community determined that Putin intervened in the 2016 presidential election to help Trump win, and Trump had pledged both during and after the campaign to improve ties with Russia. But, in recent days Congress passed new sanctions against Russia and Putin demanded the U.S. cut its embassy and consulate staff by 755. The U.S. State Department called Putin's move "a regrettable and uncalled-for act."

Trump has said U.S. oil, coal and natural gas exports are a potent diplomatic weapon.

“Russia makes its money through selling of oil, and we've got underneath us more oil than anybody, and nobody knew it until five years ago,” he told reporters earlier this month. “And I want to use it.”

The announcement also fits into Trump's vow to save the U.S. coal-mining jobs.

The contract represents the first time U.S. origin thermal coal has been supplied to a customer in Ukraine, Latrobe, Pennsylvania-based Xcoal said in a statement. The deal will create and sustain hundreds of jobs for Pennsylvania coal miners, it said.

"The U.S. coal will replace Russian origin coal at existing thermal power plants, i.e. energy security and diversification," Ernie Thrasher, Xcoal's chief executive officer said by email.

The U.S. exported more than 60 million short tons of coal worldwide last year.

--With assistance from Tim Loh and Volodymyr Verbyany

To contact the reporter on this story: Ari Natter in Washington at anatter5@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Mark Drajem