Naftogaz offers Russia new talks, won’t pay any debt until court decisions

Макроэкономика 22.01.2015 Ukraine’s Naftogaz is open to discussing the conditions by which Gazprom will provide natural gas to the Ukrainian market after April 1, 2015, the company’s press service reported on Jan. 21. It has suggested a trilateral format for a new round of negotiations (Ukraine, Russia, EU), highlighting the effectiveness of previous talks in this format. Recall, these trilateral negotiations lasted about five months and resulted in an interim gas deal between Ukraine and Russia on Oct. 30, 2014. Based on that deal, Ukraine repaid USD 3.1 bln of its accumulated debt for gas and got a USD 100/tcm discount for Russian gas (as compared to the price based on the contract signed in 2009). The interim deal terminates on March 31, and Gazprom's CEO reported on Jan. 20 that it does not intend to provide any discount after that. In its Jan. 21 press release, Naftogaz also called the Russian gas price “uncompetitive” compared to EU prices and highlighted that for this reason, Ukraine’s gas imports from Russia nearly halved yoy in 2014. “The complete removal of Gazprom from the Ukrainian market may be only a matter of time," the press-service said, citing a threat from its CEO. Naftogaz also responded to Gazrpom’s debt repayment claim of USD 2.4 bln reportedly filed on Jan. 20. The Ukrainian monopoly highlighted that it has paid USD 3.1 bln for 11.5 bcm of gas (imported in 4Q13 and 2Q14), as agreed on Oct. 30. “A decision on whether Naftogaz shall make any extra payment for this gas will be made by Stockholm Arbitration Court in due course," Naftogaz commented, as we expected.