As concerns mount over Ukraine's ability to pay its import bill, Gazprom has agreed to supply discounted gas to a Ukrainian tycoon, who has previously acted as an intermediary between it and Ukraine’s Naftogaz, a company source said today (9 October).
Dmytro Firtash's Ostchem holding will purchase 5 billion cubic metres (bcm) of gas to put into underground storage, at a 30-36% discount on the price that Ukraine pays for Russian gas, the source added, confirming Russian newspaper reports.
Gazprom's CEO Alexei Miller has said the transit of Russian gas exports to Europe is once again at risk again, due to the low levels of gas in Ukrainian underground bunkers ahead of winter, when cold weather pushes up demand.
"This deal with Ostchem will make it possible to increase the level of gas storage in Ukraine and provide for safe passage of Russian gas to Europe," the source said.
Neither Ostchem nor Gazprom made any comment.
With the extra volumes purchased by Firtash, Ukraine will hold 19 bcm of gas in storage, "the level required to ensure trouble-free gas deliveries to Europe in the 2013-14 winter season," Alfa Bank said in a note.
Gazprom meets a quarter of Europe's gas needs, and more than half of those energy exports to the EU flow across Ukraine. The remainder traverses Belarus or goes via the Nord Stream pipeline under the Baltic Sea to Germany.
Naftogaz payments frozen
The issue of Russian gas exports to Europe came to the fore this week, with reports that a London court froze $21.7 million (€16 million) out of a $75.8 million (€56.1 million) eurobond coupon payment by Ukraine's state oil and gas company Naftogaz.
Ukraine has $10.8 billion (€8 billion) of foreign currency debt maturing through 2014. Its foreign currency reserves stand at just over $20 billion (€14.8 billion), but are likely to fall, particularly if Ukrainians try to buy foreign currencies.
A row between Moscow and Kiev in January 2009 over gas prices and debts led to several weeks of supply cuts that devastated eastern European countries tied to Gazprom's export pipeline network.
After the row, both countries signed a 10-year supply deal and removed Firtash's company, RosUkrEnergo, from its role as the intermediary between Gazprom and Naftogaz.
Last year, Ukraine, the second-largest buyer of Russian gas after Germany, bought 32.9 bcm of gas from Gazprom.
Russian President Vladimir Putin said on Wednesday Ukraine would get the volumes for underground storage at a discount, paying $260 (€192.5) per 1,000 cubic metres (tcm). He did not elaborate.
Naftogaz now pays around $400 (€396) per tcm for Russian gas, more than Gazprom's other European buyers.
Putin also said Russia will lend $750 million (€555 million) to Ukraine. It was not immediately clear who would receive the funds.
His comments on the Ukrainian gas deal came just a month before Kiev is set to sign a free trade pact with the European Union, a plan that has irked the Kremlin, which is building its own post-Soviet trade bloc.
Russia fears its market could duly be flooded by competitive EU goods entering Ukraine free of import duties and being re-exported across the long border with Russia.
If Kiev signs the EU trade deal, joining the Russia-led customs union would be out of the question, senior Russian officials say.