Gazprom threatens to cut gas supplies to Ukraine on Monday

Russian state natural gas monopoly Gazprom is not going to extend to June 16 its deadline for Ukraine to pay its debt for earlier imported gas, CEO Alexey Miller told journalists on June 12. If Gazprom does not see on its accounts USD 1.95 bln by 10 a.m. on Monday, a prepayment regime for Naftogaz will be introduced, according to Miller. That means Gazprom will stop supplying gas to Ukraine unless a prepayment for the full month is made, he said. Additionally, Gazprom will file a counter appeal in the Stockholm Arbitration Court in case the Ukrainian government sues the Russian company.



Later on, Ukrainian gas monopoly Naftogaz (NAFTO) stated in a press release that Russia is intentionally striving to undermine earlier achieved agreements. Naftogaz pointed out that Gazprom unilaterally decided to come back to the old pricing method – a discount gained via an export duty abolished by the Russian government. The Ukrainian company said this approach contradicts an earlier achieved agreement to find a solution exclusively through mutual talks between the two companies. The Russian side offered an unacceptable way to solve the dispute and it failed to accept a compromise option offered by European Commission members, Naftogaz reported.



Recall, on May 26 Gazprom proposed for the first time that Naftogaz fully repay its debt for gas that was imported before end-1Q14 and also pay USD 0.5 bln (as part of debt for gas imported during April and May 2014) to avoid the shift into prepayment mode. Since that time, Naftogaz paid USD 786 mln to fully repay its debt for 1Q14, and Gazprom has shifted the deadline several times, but did not offer any compromise on gas pricing.



At the moment, Naftogaz owes USD 1.45 bln to Gazprom for gas imported in 4Q13. In April and May 2014, Naftogaz imported 6.2 bcm of natural gas from Russia, though they have yet to agree on its price. Its value ranges from USD 1.7 bln, based on the price that Naftogaz is ready to pay, to USD 3.0 bln, based on the price that Gazprom is demanding.



Alexander Paraschiy: Today is the deadline for Naftogaz to transfer the payment so that it reaches Gazprom accounts on Monday. We do not believe the Ukrainian side will accept this ultimatum, unless the representatives of the EU (which face the risk of not receiving Russian gas as of Monday) will pressure Ukraine to pay. Earlier, Ukraine promised to pay only after Russia offers an affordable price for its gas, and we believe it’s the task of the EU and Russia to offer Ukraine a proper price.



Gazprom fulfilling its threat will lead to a deadlock in the gas talks. Ukraine will not be able to prepay for gas because the pricing issue is not resolved, while Russia will not supply gas to Ukraine without prepayments. Gas cuts to Ukraine could stop the transit of Russian gas to the EU through Ukraine. Therefore, we do not believe Gazprom will follow through on its threat.



As of June 12, Ukraine has stockpiled 12.9 bcm of natural gas in its storage tanks (5.7 bcm more since end-1Q14) and can hold out until late September, when it will have to renew pumping Russian gas to secure a smooth winter season. Russia and the EU are very unlikely to wait so long without selling and buying gas, in our view.

Источник: Конкорд Капитал