Gazprom and Ukraine in debt dispute
Ed Crooks and Roman Olearchyk
8 December 2008
Financial Times
Gazprom, Russia’s state-controlled gas company, is heading for a confrontation with Ukraine over unpaid debts and future prices that could disrupt gas supplies to the European Union.
Alexander Medvedev, Gazprom’s deputy chief executive, told the Financial Times that talks with Ukraine were “far away from a settlement”, and suggested the country should not be allowed to “steal the gas”.
Gazprom believes it is owed about $2.4bn for unpaid bills up to the end of November, and has been paid only a “marginal” amount following an agreement last month for Ukraine to pay off some of its debt.
Executives from Gazprom will meet European Commission officials in Brussels on Tuesday in an attempt to explain its determination to make Ukraine pay up.
The Russian company thinks Brussels might be able to exert some influence to help bring about a solution, or can at least be persuaded that if supplies are disrupted, the fault will not entirely lie with Gazprom.
Ukraine’s leaders have in recent days pledged that their country would do everything in its power to avoid a repeat of disruptions in Russian exports to the EU.
However, officials at Naftogaz, Ukraine’s national gas company, struggled on Monday to predict how debts owed to Gazprom would be settled or when a price agreement for next year would be signed.
Ukraine is a vital transit country for the EU’s gas supplies. Russian imports supply about 25 per cent of the EU market and about 80 per cent of that gas flows through Ukraine.
The dispute over gas prices in the winter of 2005-06 led to supply disruptions and soaring prices across the EU. In a similar dispute a year ago Gazprom reduced supplies to Ukraine without a significant effect on the EU.
Gazprom says it has been making every effort to avoid cutting off Ukraine’s gas, including allowing some of the payments to be deferred.
Mr Medvedev said talks were continuing and he hoped to reach an agreement before the end of the year.
However, he quoted Vladimir Putin, Russia’s prime minister, as having “made a very clear statement that if Ukraine tries to steal the gas, we will not tolerate this situation”.
Gazprom is also seeking to finalise an October deal between Mr Putin and Yulia Tymoshenko, Ukraine’s prime minister, whereby the price paid by Ukraine will rise to EU levels by 2011. The details of the transition are still not agreed.
Ukraine is paying $179.50 per thousand cubic metres of gas, compared with an expected EU price of about $400 in the first half of next year.
Mr Putin said last week: “How can we keep the same prices if our Ukrainian partners are still getting gas twice as cheaply as Europe? Try to come to any store in Germany and say that you want to get a Mercedes for free or at half price. Who will sell it at half price?”
The confrontation has been sharpened by the global financial crisis, which has drained resources out of both Ukraine and Russia.
Naftogaz said on Monday: “The global financial crisis, namely the sliding Ukrainian currency, has complicated our efforts to settle this debt. We are currently in talks with Ukrainian and foreign banks to refinance this debt.”