Gazprom demands that Ukraine prepay for Russian gas

Negotiations on natural gas price and payment conditions between Ukraine and Russia, with EU mediation, broughts no result on the weekend, prompting Russian state monopoly Gazprom to announce on the morning of June 16 it will begin to demand prepayment for all gas supplied to Ukraine. The European Commission reported that the Russian side rejected the EU’s compromise proposal that consisted of Ukraine paying USD 1 bln on June 16 and setting Ukraine’s gas price between USD 300 and USD 385 per tcm, depending on the season, according to the Interfax news agency. Instead, Russia insisted that Ukraine pay USD 1.95 bln immediately and agree on a USD 385/tcm price for gas.



Regarding Ukraine’s debt, Gazprom’s position is Ukraine’s transit and production gas monopoly Naftogaz owes USD 4.46 bln for earlier imported gas, including USD 3.01 bln for natural gas imported in April and May and USD 1.45 bln for gas imported back in 4Q13. Gazprom reported that it has filed a lawsuit in the Stockholm Arbitration Court demanding that Naftogaz repay this debt.



Naftogaz also reported on June 16 it has filed a lawsuit in Stockholm that questions the validity of the gas deal signed between Ukraine and Russia in 2009. Naftogaz is demanding a “fair price” to be set for Russian gas and that Gazprom repay the amount that Ukraine overpaid for Russian gas since 2010, estimated at USD 6 bln.



Alexander Paraschiy: Gazprom’s move to shift Ukraine to prepayment should mean that Russia has stopped selling gas to Ukraine. Yet Russia is very unlikely to physically cut gas supplies to Ukraine, as 3/4 of the gas that goes to Ukraine is destined for EU countries. Therefore, as in earlier episodes of “gas wars,” we expect Russia will significantly decrease the volume of gas supplies to Ukraine’s transit system and will claim each day that Ukraine is “stealing Russian gas” for its public relations spin.



Ukraine has accumulated 13.5 bcm of natural gas in its underground storage facilities, as of June 13, and these stockpiles are likely to remain unchanged by mid-September, as the volumes of domestic gas production and consumption are nearly equal in the summer period. The core risk for Ukraine will be the winter season, when consumption of natural gas triples compared to the low season.



So Ukraine has four months to solve its gas dispute with Gazprom, and it has about half a year to find a way to live without Russian gas. And Ukraine always has the option of continuing to confiscate Russian gas from its pipeline, explaining that the gas is needed to cover Ukraine’s losses from the Crimean annexation and/or losses that Naftogaz alleges it suffered from excessive prices for Russian gas since 2010.

Источник: Конкорд Капитал