Next week Ukraine will have to wire Gazprom the money for the Russian gas consumed in February. Yuriy Prodan, Ukraine’s Minister of Fuel and Energy stated today that despite the issues in the country, Naftogas will make a timely payment.
“Everything will be fine, as always. We will pay timely,” the Minister said as reported by RIA Novosti.
The minister gave an evasive answer when asked how Ukraine would fund the February gas payment. “With dollars,” he said jokingly.
According to Ukraine's Acting Finance Minister Ihor Umansky, Ukraine is to pay approximately $637.6 million for the February gas.
Under the gas supplies contract between Russian Gasprom and Ukraine’s Naftogas for 2009-2019, the Ukrainian party is obliged to transfer the funds for the consumed gas no later than the seventh day of each month following the delivery. In the event that this provision is violated, Russia may request a transition to the advance system of payments with 100% percent advance payment.
This year there were no issues with payments for the Russian gas. Yet, the ex-President Yushchenko has stated earlier that the country was on a verge of bankruptcy. One of the main reasons for it, he stated, was the fact that the country was using national reserves to make payments to Gasprom.
He also said that it was an intentional policy conducted by the Prime Minister Yulia Tymoshenko, who used it in exchange for the Kremlin’s support during her presidential campaign. Yushchenko believes that this policy leads to the loss of gas transportation system in Ukraine.
Ukraine first used the reserves of Ukraine’s National Bank for the December payment. It might have been the only chance to fulfill the obligations under the Gasprom contract because the situation in Ukraine was very intense.
At the end of last year, rating agency Fitch lowered Ukraine’s Sovereign rating from В to В -, as well as the ratings of other cities and banks of the country in the event that the negative forecast would linger. This means that the country is in a pre-default state.
At the end of September, Naftogas defaulted on Eurobonds. Then Ukraine State Railway failed to make $110 million payment, causing technical default.
Yet, the Ukrainian government continues to assure that everything is fine. For example, the head of the Ministry of Fuel and Energy rebuffed the statement that Naftogas was tittering on the brink of bankruptcy.
“These talks have been going around since 2008. They say that NAK Naftogas will be unable to make gas payments; that it is on the brink of bankruptcy. But you know that last year the international obligations of NAK Naftogas were restructured NAK Naftogas is not on the brink of bankruptcy,” Prodan announced.
At the same time, Naftogas stated the reasons that make accumulation of company funds for timely and complete payments for imported gas complicated.
In particular, the debt of Ukraine’s heat suppliers to Naftogas this heating season is $455 million, reports RIA Novosti Ukraine.
These heat suppliers have paid only 78% of their obligations to Naftogas for the previous heating season, and their debt amounts to $247 million.
Naftogas says that poor payments within the country complicate the situation with Ukrainian payments to Russia.
It was reported earlier that Ukraine made payment for the January Russian gas in full on February 4.
Russia and Ukraine have already been through a “gas war” over missed payments. In January of 2009, the EU consumers were not getting Russian gas for two weeks. In absence of the contract for 2009, Gasprom stopped supplying gas to Ukraine on January 1, and transit of gas through Ukraine to the EU was stopped on January 7. The transit was resumed only on January 20.
Last year, the European Union expressed its concerns about uninterrupted gas supply of Russian gas, asking the parties to settle the issues.