Russia pays Ukraine for gas transit, urges it to start importing gas

Макроэкономика 10.11.2014 Gazprom has paid Naftogaz for natural gas transit for 4Q14, the Interfax news agency reported on Nov. 10, citing Gazprom spokesman Sergei Kupriyanov. He explained that the payment for transit was unilaterally calculated by Gazprom, based on their contract and amount prepaid for earlier periods. The transit fee is a derivative of the price at which Ukraine purchases natural gas from Russia, and Ukraine insisted that the gas price for 2Q14 and 4Q13 should be USD 269/tcm, which is much smaller than what is based on the contract (USD 394/tcm and USD 385/tcm, correspondingly). Gazprom did not agree with such a pricing approach and thus has paid for the earlier gas transit more than Ukraine demanded. In other news, Russian Energy Minister Alexander Novak told journalists that Ukraine needs to start importing Russian gas right now. “The sooner they will pay and gas will be supplied, the better it would be for them and for European consumers," Novak declared on Nov. 9, as cited by Interfax. He believes Naftogaz will use the money received from Gazprom as a transit payment to prepay for the import of Russian gas. On Nov. 7, Naftogaz reported it had received a bill from Gazprom for prepayment of natural gas (in the amount of 2.0 bcm, according to Novak, which costs USD 756 mln) though it stated that prepayment will only be made if Naftogaz decides on how much and when it will need to import gas. Alexander Paraschiy: We agree with Novak’s statement that Europe would be more confident that the supply of Russian gas will be smooth if Ukraine buys more gas from Russia in the near future. Though for Ukraine, the problem of gas stockpiles (which are high enough) is less important than the problem of its low foreign currency stockpile. Since gross international reserves may decrease to below two months of future imports by the end of 2014, it is important for the government to minimize the spending of foreign currency. Thus, Naftogaz is very unlikely to buy 2 bcm of Russian gas by the end of 2014. The maximum bill that it will pay to Gazprom will be the amount of the transit fee that it is going to receive from Gazprom, which would be enough to prepay slightly more than 1 bcm of gas imports. This corresponds to the information cited by zn.ua last week that Naftogaz might only buy 1 bcm of gas from Russia in 4Q14. And this is in line with the Ukrainian government's order issued last week to enable the central bank to enable Naftogaz to avoid the compulsory conversion into UAH of its dollar revenue from gas transit.