Ukraine to borrow $1bn to buy gas and fuel oil for reserves

War-torn Ukraine wants to borrow $1bn to create a strategic reserve of natural gas and fuel oil to cover local needs in emergency situations, Prime Minister Arseny Yatseniuk has said.

"The government has adopted a decision to establish reserves of gas and fuel oil worth $1bn (£649m, €878m) via borrowing under state guarantees," Yatseniuk told a government meeting.

"This $1bn will be spent to buy this strategic reserve," he added, giving no details about gas origin, Reuters reported.

Ukraine, which has always bought Russian gas, wants to reduce its dependence on energy supplies from Russia and switch to imports from European states.

Last month, Ukrainian state-run energy firm Naftogaz said Kiev planned to import up to 60% of its gas needs this year from Europe, with Russia delivering the rest.

Kiev expects that European summer spot gas prices for Ukraine could fall to between $250 and $300 per 1,000 cubic metres, allowing Ukraine to boost its underground storage reserves.

Ukraine bought Russian gas at $329 per 1,000 cubic metres in the first-quarter of the year.

Relations between Kiev and Moscow have soured following nine months of conflict that has pitted Ukrainian government troops against pro-Russian separatists who have declared a "people's republic" in eastern Ukraine.