Gazprom sends USD 1.7 bln prepayment bill to Naftogaz, EU promises to resolve the issue

Макроэкономика 14.05.2014 Russian natural gas monopoly Gazprom filed a prepayment bill to Ukrainian counterpart Naftogaz (NAFTO) on May 13, according to Gazprom spokesperson Sergey Kupriyanov. The Russian company is demanding that Naftogaz pay USD 1.658 bln by June 2, to be eligible to import 3.42 bcm of gas in June. According to Kupriyanov, the total debt of Naftogaz for natural gas imported up until end-April 2014 is USD 3.51 bln. Interfax reported on May 13 that Naftogaz is actively pumping Russian gas into its storage units now, estimating that it may import about 3.77 bcm of gas this month (up 87% compared to the average import for 1Q14 and up 45% compared to April). The European Union is planning to help Ukraine in solving the prepayment issue by the end of May; EU Energy Commissioner’s spokesperson Sabine Berger stated the same day, according to UNIAN. She assured that the EU is intensively working with the Russian side on this issue. Alexander Paraschiy: Given Interfax estimates, Naftogaz will import 6.4 bcm of natural gas just in April-May 2014, which will be 5% more than Ukraine imported in 1Q14 and 2x more than it imported in 2Q13. The reasons for such a hurry are clear - as we assumed earlier, Naftogaz is doing its best to accumulate enough stockpiles of gas and will then stop buying it in June and the following months. Meanwhile, it counts on the negotiating skills of the EU Energy Commissioner in his talks with Gazprom on gas pricing for Ukraine. Remember that the Ukrainian side is dreaming that it will pay the price of USD 268.5/tcm for Russian gas in 2Q14, while Gazprom is demanding that the price should be USD 485.5/tcm. To fully repay all its debts for imported gas (by the end of May) and to prepay for June in-line with Gazprom’s wishes, Naftogaz will have to pay USD 7.0 bln to Gazprom by June 7, 2014. This amount is far more than IMF and EU have agreed to provide to Ukraine so far. In the best (while not very realistic) case, if no prepayment is demanded and the gas price remains at the USD 268.5/tcm level in 2Q14, Ukraine will have to pay only USD 3.95 bln by June 7, which is clearly affordable. The difference is so vast that Naftogaz prefers to wait by not paying even the agreed amount of debt (USD 2.24 bln for gas imported until end-1Q14). As we understand it, Naftogaz assumes that the more it owes to Gazprom, the more the Russian monopoly will be willing to negotiate.