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. Last Updated: 07/27/2016

Naftogaz Says It Will Pay for October Gas

Naftogaz Ukrainy will pay a $470 million gas bill to Russia on time, Ukrainian Energy Minister Yury Prodan said Wednesday, easing concerns that the state energy company might miss its payment for October supplies.

“There’s still time to accumulate the funds, and Naftogaz will make its payment,” Prodan told a news conference, Interfax reported. He said the company could seek loans if necessary.

Naftogaz has not missed any payments since Prime Ministers Vladimir Putin and Yulia Tymoshenko brokered a deal in January to end a supply disruption that left large swaths of Europe without gas for several weeks.

But external financing for gas payments, including from the International Monetary Fund, has fallen into doubt amid political bickering in Kiev ahead of a Jan. 17 presidential vote. Both Tymoshenko and President Viktor Yushchenko are in the running.

About one-fifth of Europe’s gas comes from Russia through Ukraine, and Putin warned the European Union presidency Sunday that the situation in Ukraine could lead to another disruption of supplies.

Bohdan Sokolovsky, an energy policy aide to Yushchenko, said Tuesday that Naftogaz would need to find as much as $360 million to settle the bill after earning just $130 million to $140 million in the month.

Ukraine will have “to borrow money from other sources” and will probably request the money from Moscow, Sokolovsky said at a news conference. Ukraine imported only 2.4 billion cubic meters of gas last month, instead of 3.5 bcm under the terms of the contract signed in January. The country is also unlikely to import the stipulated volumes in November and December, he said.

As a result, Gazprom could impose penalties of $7 billion on Ukraine, as the deal required Naftogaz to buy at least 40 bcm in 2009.

But on Wednesday, Prodan brushed off those concerns, saying Gazprom would not demand payment of the penalties. Putin said several times earlier this year that Gazprom would not demand the fines because of the country’s economic hardship.

Tymoshenko told Putin by telephone Friday that Yushchenko was impeding “the normal partnership between the Central Bank, which had the gold reserves at disposal, and the government,” and was blocking a money transfer for Russian gas.

Citing the data from the International Monetary Fund, Putin said Friday that Kiev had enough money to pay. Kiev has gold reserves of $27 billion to $28 billion, and the IMF is not opposed to using them to pay for energy supplies, he said.

Sokolovsky accused Tymoshenko of misinforming Putin about Yushchenko’s intentions. “Yushchenko had no intentions to block any options that are legitimate and covered by the law,” he said.

The president had invited government officials and Naftogaz managers to discuss the problem, but none of them had come.