Time ticks down for Ukraine on Gazprom payment and supply for coming year

It's almost crunch time for Ukraine and Gazprom to settle a price dispute over gas supplies, which could see gas deliveries into Europe disrupted. Gazprom's board of directors will meet on Monday to discuss the problem.

Speaking in a national broadcast earlier in the week, Ukraine’s President Viktor Yushchenko said the sides agreed to postpone the debt repayment until next year.

“And a part of the debt was restructured for January to February, so the issue has been resolved.”
Gazprom denies the two sides reached an agreement on debt restructuring. It also insists Ukraine pays in full before the year’s end – or face the consequences.

No contract for 2009 and no gas deliveries as of January 1, according to Gazprom spokesman Sergey Kupriyanov.

“Ukraine is suggesting that we should wipe off the debt and start on a blank page on January 1. We can’t go for that because it would mean we’d never see the money.”

Ukraine’s faltering economy means it simply doesn’t have the cash. The Cabinet this week said it would offer state guarantees if Naftogaz attempts to find the money abroad. If worse comes to worst, says Tatyana Mitrova, Head of the Energy Market Studies Centre, Gazprom could wipe the debt in exchange for a Naftogas stake.

“As Naftogas is close to its bankruptcy, in this case, some of, some part of its assets could be transferred to the company it owes this money.”

Some, such as Aleksandr Nazarov, Analyst at Metropol, argue the $2 Billion plus is a drop in the ocean for Gazprom – suggesting it’s more about politics than finances:

“It’s a political question. Gazprom, in my opinion, is fed up, as it was fed up 2 years ago and one year ago with consequent Ukrainian delays in payments and agreements for the next year. So, basically, Gazprom is trying, and it is a very reasonable thing, is trying to set things up as soon as possible.”

Tatyana Mitrova, amongst others, disagrees.

“For Gapzrom, $2.4 Billion is about 7%-10% of its whole investment programme for the next year. So one tenth of its investments are just frozen in Ukraine.”

But even if Naftogaz doesn’t pay, forcing Gazprom to shut off gas supplies to Ukraine, the gas giant says would stick to its contractual obligations to the European consumers.