Thursday, January 01, 2009

Gazprom's side of the story

Gazprom's official side of the story:

"Gazprom Confirms No New Contract with Ukraine After Talks Fail

After weeks of negotiations OAO Gazprom and NAK Naftogaz Ukrainy have reached a critical impasse in efforts to finalize a new contract for gas deliveries to Ukraine in 2009.

Gazprom has been doing everything in its power to make a success of the negotiations, but as there is no contractual basis for further gas supplies to Ukraine, Gazprom has no option but to reduce supplies to Ukraine by the amount committed to Naftogaz Ukrainy – without in any way reducing the quantities contractually committed to our onward customers in Europe – from 10:00 am Moscow time on Thursday, 1 January 2009.

The previous contract expired on Wednesday, 31 December 2008.

At issue are the following: the status of the repayment of $2 billion in debt owed to Gazprom for gas deliveries to Ukraine in November and December 2008, as well as fines and penalties; attempts by Naftogaz Ukrainy to amend a separate and pre-existing gas transit contract that is valid through 2010; and Ukraine’s apparent unwillingness to move towards fair market prices for gas supplies, despite signed agreements to do so.

On the issue of debt repayment, RosUkrEnergo has received a payment from Naftogaz Ukrainy in the amount of $1.5billion out of a total due of $2 billion. Naftogaz Ukrainy has recognized the $2 billion debt it owes Gazprom and had the money to pay that debt.

Naftogaz Ukrainy has also taken the radical step of tying the fate of the new gas delivery contract to changes to a pre-existing and wholly separate gas transit contract. The existing transit contract, valid through 2010, obliges Ukraine to transit at least 110 bcm of gas per year to Europe. Gazprom currently pays Ukraine a fee of $1.60 per 100 km, which is comparable to transit fees paid to other European countries.

Naftogaz Ukrainy is currently attempting to nullify this contract and double the agreed-upon transit fee. This desperate act puts at risk the stability of Gazprom’s natural gas supplies to Europe, something which Gazprom deeply deplores and for which it cannot be held in any way responsible.

On the issue of gas prices, the prime ministers of Russia and Ukraine, on 2 October, 2008, signed a memorandum of understanding on direct, long-term contracts and gradual price increases. The agreement set up a step-by-step, three-year period for Ukraine’s transition to purchases of Russian natural gas to market prices. Ukrainian Prime Minister Yulia Tymoshenko said at the time, “The parties confirmed their willingness to establish a gradual transition to market prices within three years.” Despite these assurances, Ukraine refused Gazprom’s offer of $250 per 1,000 cubic meters, nearly half of what Gazprom charges its western European customers.

Gazprom has taken every possible step to find a mutually acceptable solution, and to bring and keep both sides at the negotiating table. This is in spite of threats by Ukrainian government officials to call off talks in the final hours and reversals by Naftogaz Ukrainy on steps to transitioning Ukraine to market prices for gas.

Gazprom will continue to work hard with Naftogaz Ukrainy and our European partners to find a resolution that is both fair and commercially viable. Gazprom will also do everything it can to ensure that all volumes destined to our European customers are delivered in full."

And a Happy New Year to everybody..

Update: President Yushchenko's official website carries a statement signed by him and, significantly, by PM Tymoshenko [only recently called 'vorovka Yulyechka', or little thief Julie, by Yushchenko] declaring Ukraine has paid for all gas delivered up to 30th December 2008, and claiming the country has no debts before the Russian Federation. It claims Ukraine has sufficient gas in its vast underground storage facilities to last the country for a protracted period.

[No English version posted on the pres's site yet - the 1000+ presidential secretariat employees should get their fingers out of their *****

I seem to recall from three years ago, diverting the huges quantities of gas intended for delivery to Ukraine elsewhere, or reducing output from gas fields at source is technologically quite problematic for Gazprom, so the dispute may be resolved after a few days or weeks.]


elmer said...

Gazprom has been waging an intense media public relations war about the gas cut-off, in order to try to avoid adverse reaction as in the previous cut-offs.

Ukraine has paid $1.5 billion - to ROSUKRENERGO - for gas for which it owed money.

One of the sticking points is that Gazprom wants Naftohaz to pay an additional $600 million, or over 1/2 BILLION in --- PENALTIES, before it will engage in talks for new contracts.

RosUkrEnergo, as everyone knows, and as is well documented by Roman Kupchinsky, among others, is a corrupt slush fund entity consisting, in part, of a few Gazprom insiders who benefit personally from these deals.

So here we are - what kind of contract has practically more in PENALTIES than the contract itself - 1/2 BILLION dollars?

Apparently, some Gazprom insiders, through the slush fund RosUkrEnergo, are hoping for a nice, big fat present for New Year's.

They ought to be sent to Siberia instead.

elmer said...

Here are 2 excellent articles about this mess, without all of the Gazprom/rooshan drama queen hysteria:

Note the excerpt from the second article about ROSUKRENERGO, which raises its ugly head ---- again:

In this dispute, the role of an opaque gas trading company that is the exclusive intermediary for shipments to Ukraine is one lever of influence, Perepelitsa added.

The Swiss-based trader, RosUkrEnergo, is half owned by Gazprom and half by a Ukrainian businessman, Dmitry Firtash, who has ties to the country's president.

RosUkrEnergo buys gas from Gazprom and Central Asian suppliers at rates below those charged in Europe, re-sells most to Ukraine, but exports a portion to higher paying European nations such as Poland for a profit.

Half the profit reverts to Gazprom and the rest flows to Firtash and his partners. Critics say the arrangement at best creates a conflict of interest woven into the business and political elite of Ukraine, and is corruption at worst.

The deal is unpopular in Ukraine and controversy deepened when Yushchenko's press aide conceded that the president had met several times with Firtash after the 2006 agreement that made RosUkrEnergo the exclusive supplier.

Raising prices on RosUkrEnergo thus undermines Yushchenko's ally in business, Perepeliltsa said.

Anonymous said...

Something's a bit odd here. Russia does not seem to like Yushchenko and would prefer a different President. Agreed? Why then should they enable an ally of Yush to amass vast amounts of money and be in a position to fund Yush's political campaigns? After all what use if Firtash apart from his money?

Gene said...

Europe needs to get involved as this situation will not improve without their involvement. There is far too much corruption between Ukrainian and Russian officials. What is really needed is a very transparent arrangement so that EVERYONE can see what comes into Ukraine and what goes out, as well as a definite paper trail so EVERYONE can see what has been received, transferred and paid for.

My guess is that this will not happen without a lot of pressure from the West, as too many powerful people, both in Ukraine and Russia, are benefitting from this current non-transparent so called agreement.

elmer said...

In answer to the question above, about why support an ally of Yushchenko -

it's not about supporting anyone in Ukraine. It's about Gazprom/Kremlin officials getting their cut.

They don't care with whom they make deals, as long as they get their cut.

With Ukraine, they have done it through RosUkrEnergo. But that's no the only intermediary used by Gazprom/Kremlin.

And Gazprom is not shy about bribing public officials in other countries directly, such as in Italy or Serbia, for example.

Plus, as we have seen, roosha has directly intervened in Ukrainian elections, pouring in campaign money, plus rooshan TV media, etc.

So the trick will be to see what kind of mechanism Gazprom/Kremlin come up with if RosUkrEnergo is indeed kicked out of the picture, in order to continue the gravy for a select few Kremlin insiders.

Anonymous said...

Plus, as we have seen, roosha has directly intervened in Ukrainian elections, pouring in campaign money, plus rooshan TV media, etc.

So Putin who presumably does control Gaxprom does care who are the political leaders of Ukraine and presumably - he intests money in it and he's not paying to back Yush. On the other hand Firtash wouldn't be in on the trade against Putin's wishes. If he was Yush's financial backer then Putin it seems would be paying for one thing with the left hand and the opposite with his right.