WEDNESDAY, JULY 18, 2018
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Russian president, PM differ on gas debt
Journal Staff Report

MOSCOW, Oct. 9 Russian President Vladimir Putin and Russian Prime Minister Viktor Zubkov each on Tuesday cited widely different figures while describing the level of Ukraines debt for gas supplies, spreading more confusion over the sensitive issue.

Zubkov said Ukraine owed more than $2 billion for natural gas supplies as of early October, a sharp increase from the $1.3 billion cited by Gazprom last week.

But hours later, Putin, at a meeting with Yanukovych in Moscow, said he was surprised by Ukraines unexpectedly high level of debt at about $1.3 billion.

The different figures cited by the Russian leaders underscore the lack of transparency of between Ukraine and Russia in the gas trading business, a sector that is controlled by well-connected gas trader RosUkrEnergo.

It also shows the Ukrainian government has little control over the issue and information about the debts. Finance Minister Mykola Azarov last week disputed the $1.3 billion debt cited by Gazprom.

Yanukovych was in Moscow on Tuesday to settle the debts after Gazprom had last week threatened to cut gas supplies to Ukraine unless the country pays the debt before the end of October.

The controversial debt issue emerged less than two days after two pro-Western parties outperformed pro-Russian groups at the Sept. 30 snap election. The parties are now in talks to form the government that would likely replace the pro-Russian government of Yanukovych within several weeks.

The developments are watched carefully as a clash between Ukraine and Russia over gas supplies may lead to disruptions of gas supplies to the European Union. Brief disruptions already took place in January 2006 over gas price dispute.

I have to turn your attention to the problem of debts and growing arrears for gas supplies, Zubkov told Yanukovych. The level of the debt owed to Gazprom rose to $2 billion from the beginning of the year, he said citing RosUkrEnergo, UkrGaz-Energo and Naftogaz Ukrayiny among the debtors.

Ukrainian officials never counted RosUkrEnergo, a Swiss-based gas trader in which Gazprom owns 50% stake, as a Ukrainian company. The officials previously also denied that Naftogaz, the state-owned company, owed any money to Gazprom.

RosUkrEnergo buys about 55 billion cubic meters/year of gas from Gazprom at $100.5/1,000 cubic meters in the Central Asia and moves it across Russia to Ukraine to sell to UkrGaz-Energo at $130/1,000 cu m.

UkrGaz-Energo is a 50-50 joint venture between RosUkrEnergo and Naftogaz, but its top managers are thought to be loyal to RosUkrEnergo, which gives the Swiss trader leverage over the companys decisions such as debt payments.

Dmytro Firtash, a Ukrainian national who owns 45% stake in RosUkrEnergo, is a close friend of Ukrainian Energy and Fuel Minister Yuriy Boyko. At least on one occasion last year, Firtash has given Boyko a 6-month power of attorney to manage and dispose of $4.5 billion assets in gas and chemical sector.

An agreement signed in Moscow by Boyko and Gazprom CEO Alexei Miller calls for settling the debt before November 1.

RosUkrEnergo will clear about $1.2 billion in debts by transferring to Gazprom an undisclosed amount of gas it had already stored in Ukrainian underground gas tanks, according to Zubkov.

Assuming the gas is priced at $130/1,000 cu m as had been previously disclosed, the amount of gas to be given by RosUkrEnergo to Gazprom should be at 9.2 billion cubic meters.

Zubkov also said the remaining debt of $929 million will be paid in cash by UkrGaz-Energo and Naftogaz by Nov. 1. The companies will probably be borrowing money to pay the debt, analysts said.

These figures are stipulated in the agreement to settle the debts, Zubkov said. The Ukrainian companies will have to clear the debt before Nov. 1.

But Putin, while meeting Yanukovych later in the day, again cited the debts at $1.3 billion. It was unexpected that such a big debt had been accumulated, Putin said. Its nice that you have managed to find the way to untie this knot. (jp/ez)

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