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26 Feb, 2009 16:11

Round two of gas row in March?

Round two of gas row in March?

Gazprom’s top management is concerned that Naftogaz will not be able to pay for the gas supplied in February. The Ukrainian company assures it has the money.

The Russian gas giant’s board of directors was discussing on Tuesday the fulfillment of the contract on the supply of natural gas to Ukraine and its transit through the country’s territory to Europe.

An unnamed member of the board told Kommersant business daily that the head of Gazprom’s financial department Andrey Kruglov said during the meeting that he was concerned with Ukraine’s ability to pay. He was quoted as saying:

“If we don’t receive $US 400 million by March 7, then on March 8 we’ll have to cut off Ukraine again.”

Under the current contract, Ukraine has to pay for gas supplied by Russia the month following the supply. The seventh day of each month is the deadline. In February, Ukraine is expected to receive about $US 400 million worth of gas.

Meanwhile Naftogaz said Thursday that it managed to find funds to pay Gazprom in March, according to company’s spokesman Valentin Zemlyansky.

“We don’t consider the negative scenario, we have a bank confirmation that we have the needed sum in dollars,” he told RIA Novosti news agency.

He added that while the company does have problems with consumer debt, they will not affect its ability to follow its contract with Gazprom.

Earlier Kommersant’s source in the Russian gas monopoly explained that if Naftogaz fails to pay in time, Gazprom may reduce the amount of gas delivered to the border with Ukraine by that bound for Ukraine itself, leaving the gas for European consumers intact. In January this year after a similar move Gazprom accused Naftogaz of stealing fuel bound for Europe and cut off all supplies going through Ukraine’s territory.

The two-week standoff ended when Russia and Ukraine signed a new ten-year contract. Under the contract, Naftogaz pays Gazprom a market price with a 20 per cent discount in 2009, but switches to the full price starting from 2010. Ukraine on its part gave Russia a discount for the transit fee for 2009.

Last week Naftogaz warned it may find it difficult to cover the gas bill due to the mass amount of Ukrainian consumers failing to pay for gas bought from the importer. On Wednesday the company also said it wanted to reduce the amount of gas bought from Russia in 2009 by 20% down to 33 billion cubic meters.

Some experts suggest that the only way for Naftogaz to find money before the deadline is through credit from the government. Ukraine is Europe’s worst country in terms of risks of investment, and the forecast for the future is negative. Therefore, borrowing from foreign banks is an unlikely option.