Ukraine СScrapedТ for Gas Cash

BloombergPrime Minister Vladimir Putin and Tymoshenko shaking hands in April.

KIEV — Naftogaz Ukrainy had trouble finding the cash to pay Russia for last month’s gas bill, Prime Minister Yulia Tymoshenko said Wednesday, while one official suggested slashing imports to the end of the year.

Naftogaz was at the center of a row with Russia last January over late bill payments and gas prices, which led to cuts in supplies to hundreds of thousands of European customers of Russian gas that normally flows through pipelines across Ukrainian soil.

The company said late Tuesday that it paid the September bill, which officials had put at about $400 million.

“This was not easy to do,” Tymoshenko told a regular government meeting. “We worked for a month to scrape together every single penny, every single hryvna, to activate all the systems of resources for the payment of gas.” European Union politicians are wary of another “gas war” between Kiev and Moscow and are closely monitoring developments.

The EU receives about 20 percent of its gas from Russia via Ukraine, while some countries on its eastern and southern borders are almost entirely reliant on that gas.

Naftogaz has been squeezed in recent years as it buys Russian gas at fast-rising prices but has to sell it at home at subsidized prices. The company was deemed to be in restricted default of a $500 million eurobond due last month after failing to repay it by the maturity deadline.

Naftogaz will pay $208 to $209 per 1,000 cubic meters of gas supplied by Gazprom this quarter but sells it to local utilities at about $100.

The state has helped Naftogaz pay its bills but Ukraine is in a deep recession that has stretched its finances and it depends on a $16.4 billion International Monetary Fund bailout.

President Viktor Yushchenko’s energy envoy Bohdan Sokolovsky indicated just how much Naftogaz leans on the state, saying it had only paid $130 million of the $400 million from its own funds. The rest was funded through various forms of borrowing.

“The situation in the fourth quarter has become significantly more difficult, as the revenue inflows [to Naftogaz from its customers] will not increase while payments [to Gazprom] will rise sharply,” Sokolovsky told journalists.

Naftogaz may face a $3 billion bill in the last three months of this year for the import of 14 billion cubic meters if Ukraine proceeds with plans to import about 30 bcm in total this year, as Tymoshenko has said it would.

Even that is lower than the 40 bcm that Kiev promised to buy under the deal that ended the January gas row. Tymoshenko has said Gazprom will not impose penalties on Naftogaz for buying less than promised, and so far Russian officials agree.

Now, officials suggest Ukraine — Gazprom’s largest country client — could buy just 5 bcm, not 14, to the end of the year.

“Our needs in the fourth quarter are 15 to 16 bcm. We need from Russia no more than 5 billion,” Ivan Dyak, an energy advisor to Yushchenko, told journalists. Aside from the Russian gas, 5 bcm could come from Ukraine’s own gas production and 5 bcm to 6 bcm from underground storage, he said.

Naftogaz and Gazprom declined to comment on these figures.