Gazprom warns about Ukrainian gas debts

Russian energy company Gazprom has confirmed that Ukraine, as a state, has no debt to it for gas supplies, while enterprises do. The company claims the debt stands at over $US 1 BLN and says it will be forced to reduce gas supplies if the country fails to

Supplies to Europe – 'in full volume' 

Who's to blame?

“Massive robbery”: Timoshenko

Gazprom's warning

Ukrainian Fuel and Energy Minister,Yury Boyko, who is currently in Moscow, has met with Aleksey Miller, CEO of Gazprom. No official statements have yet been made about the meeting.

Ukraine's First Deputy Prime Minister, Mykola Azarov, says his country has no debts to Gazprom. The Ukrainian Energy Ministry claims the debt is between economic entities only. Gazprom confirms this, but says the debt problem is an 'objective fact'.

Supplies to Europe – 'in full volume'  

“Today, Ukraine has stated that it has no debts for Russian gas. If the talk is about Ukraine as a state it is true, but the debts of enterprises and other economic agents for gas supplies this year are an objective fact which cannot be denied. I repeat it once again: the existence of a debt is an objective fact which could not be linked to the elections or any other event. We have made our statement exclusively because of the approaching autumn and winter period. Ukraine is constantly failing to meet its contract obligations and we did not see any other way of solving this problem except for making it public. Let us hope for the earliest solution of the debt problem. For our part, we will do everything to ensure uninterrupted gas supplies to European consumers in full volume,” Sergey Kupriyanov, Gazprom spokesman, declared.

Who's to blame?

Sergey Kupriyanov, Gazprom spokesman, stated earlier that the company asked its Ukrainian counterparts to regulate the gas payments on more than one occasion, but no real measures were taken.

“Gazprom today has sent a notification to our European partners about current problems with the gas delivery to Ukraine. The Russian side is fulfilling its contractual obligations in full. However, Ukraine’s debt as a gas consumer has exceeded $US 1 BLN 300 MLN. Gazprom more than once has asked its Ukrainian counterparts to regulate its gas payments, but no real steps have been taken. In view of the upcoming autumn-winter peak of gas consumption and systematic disregard of the contract, Gazprom will have to cut gas delivery to Ukraine if the conflict is not resolved by October,” Sergey Kupriyanov said in his statement.

The dispute between Gazprom and Ukraine began in May 2005 when Russia stated that Ukraine should pay the market price of $US 230 for 1,000 cubic metres for gas whilst Ukraine was paying $US 50 at that time. Ukraine objected to those demands and as a result, Gazprom cut off supplies to the country on January 1, 2006. Nevertheless, on January 4 a preliminary agreement was signed between the two parties that managed to find a compromise.  

Now Gazprom says Ukraine is not fulfilling its obligations and warns its European partners that measures can be taken such as the reduction of gas supplies.   

Meanwhile, the head spokesman for Naftogaz, Gazprom's partner in Ukraine, has said that the company was very surprised to learn there was any kind of debt. They say they will investigate the figures and release an official statement by tomorrow.

The Ukrainian Security Council has also said that this is the first time it's been made aware of the debt.   

However, UkrGazEnergo, the company that receives gas supplies from Russia and distributes them to Naftogaz and private suppliers, has confirmed the $US 1.3 BLN debt and says that this is due to the fact that Naftogaz has not paid for the gas.

“Massive robbery”: Timoshenko

Yulia Timoshenko, one of the key Ukrainian politicians, has also commented on the issue.

“You can see now how insincere Prime Minister Viktor Yanukovich was. Now, as his government is about to leave, we discover examples of massive robbery. Gazprom says we have a debt and I'd like those ministers to tell us who gave them the right to take Naftogaz money and accumulate such a huge debt. There should be no middlemen in our relations with Russia. Otherwise what's the point in changing the government?” she claimed.

Gazprom's warning.

Analysts say Gazprom issued the warning in advance as a way of avoiding future criticism from its European partners.

“I think part of the reason for them saying this now is that when they had disputes in the past, they came under a lot of criticism from the European Union and consumers in Western Europe that gas supplies were reduced and that this had a knock-on effect on supplies to Europe with no warning to European customers.  So, part of what Gazprom is doing, I think, is saying, ‘Look, we’re warning European customers now that this may happen’. Now, if Ukraine responds to any reduction in gas supplies by taking gas out of the pipeline that is contracted to supplies further down the line, further west in Europe, then clearly that has a knock-on effect for other European consumers. And in that way yes, perhaps Gazprom is hoping that  by being very open about this, announcing it in advance, that it will succeed in getting other people to put pressure on Ukraine to meet its obligations for gas delivered by Gazprom,” Julian Lee, energy analyst, said.

But Mikhail Kroutikhin, Editor-in-Chief of the Russian Energy Weekly magazine, said that Gazprom is also to blame and the gas payment issue is not the main reason for sanctions against Ukraine.    

“Ukraine is a very convenient customer for Gazprom because it helps to explain the shortages of gas supply. Firstly, there are shortages of gas supply. And secondly, the government can choose some convenient victim to accuse of being insolvent or hampering gas deliveries to Europe. And once it was Belarus, the other time it is Ukraine and I don’t know who can be the victim next time,” Mr Kroutikhin commented.