Ukraine Promises to Settle Gazprom Debt

Cash-strapped Ukraine agreed Tuesday to make good on debts to a Gazprom subsidiary for past deliveries by the start of next week, at the same time expressing hopes for a lower price in a contract yet to be signed for next year.

Gazprom and Naftogaz Ukrainy, Ukraine's national gas company, declined to name an exact figure to be repaid but said it would include the bill for September and part of October.

The outstanding debt remains a major obstacle to implementing a deal negotiated last month by Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, providing Ukraine with a discount price and cutting an intermediary out of the gas trade between the two countries. Part of the agreement is that the deal will not come into effect if the debts are not cleared.

As a result, no agreement has been signed covering supplies for next year, and Gazprom went as far Saturday as to warn of a possible cutoff of supply to Ukraine if no deal is reached.

Gazprom repeated Tuesday that Ukraine owed $2.4 billion for gas supplied in September, October and through the end of November, as well as late-payment penalties. Naftogaz spokesman Valentin Zemlyansky said by telephone from Kiev that an exact figure had yet to be determined.

Tuesday's agreement was reached during talks between Gazprom CEO Alexei Miller and Naftogaz chief Oleh Dubyna, the two companies announced in identical statements. Negotiations will continue over the repayment of the remaining debts, Zemlyansky said.

The statements did not specify how much of the debt was owed to Gazprom and how much to RosUkrEnergo, the intermediary that buys gas from Gazprom to sell to Ukraine. Gazprom owns half of RosUkrEnergo.

Alexander Nazarov, an analyst at Metropol, said that at least $2 billion of the total debt is owed to Gazprom, stemming mainly from the cost of buying the gas in Central Asia before selling it along to Ukraine.

A source at RosUkrEnergo said Ukraine owed $429 million for September, $799 million for October, $834.5 million for November and $347 million in penalties, Interfax reported.

Bohdan Sokolovskyi, an aide to Ukrainian President Viktor Yushchenko, quoted roughly similar figures in Kiev on Tuesday.

A call to Gazprom spokesman Sergei Kupriyanov went unanswered Tuesday, while a spokesman for RosUkrEnergo was unavailable for immediate comment.

Sokolovskyi said Ukraine was counting on the discounts for next year, which would lower the price it pays to $150 per 1,000 cubic meters of gas in the first quarter of 2009, from the current $179.50.

The calculations were based on the assumption that Ukraine will retain its 50 percent discount on the prices Gazprom charges European Union countries and that those prices will fall to $300 per 1,000 cubic meters for the first three months of the year.

Gazprom's Miller said last week that the market price for Ukraine beginning in January would be $400.