By Andrey Ostroukh
MOSCOW--The Russian state-controlled natural gas monopoly
Gazprom has billed Ukraine's state-owned energy firm Naftogaz $11.4
billion for not importing the full agreed amount of gas in 2013,
Gazprom's Deputy Chief Executive Alexander Medvedev said
Thursday.
The move adds pressure on the already battered economy and
finances of Ukraine because its ballooning debt gives Moscow the
right to demand an early repayment of a loan--which could
theoretically cause a domino effect on about $20 billion of Ukraine
sovereign and quasi-sovereign debt.
Moscow provided Ukraine with a $3 billion loan in late December
when it bought its Eurobonds. The bond prospectus stated that the
volume of total state debt and state-guaranteed debt should not at
any time exceed 60% of Ukraine's annual nominal gross domestic
product.
If Ukraine fails to meet this condition, Moscow may demand an
early redemption. So far the ratio is below the 60% threshold, but
Russia's finance ministry said it is monitoring the figures
"closely".
The latest figures from Ukraine put state debt at 804 billion
hryvnia ($70 billion), or 52,7% of the GDP. If Gazprom's demand is
met, the ratio would rise above the 60% threshold.
Ukraine, which hopes to borrow heavily from the International
Monetary Fund and other institutions to fix its economy, is under
further pressure because a large proportion of its debt is
nominated in foreign currencies, which grows as its currency, the
hyrvnia, weakens and economy shrinks.
However, it's far from certain that Gazprom's demand will be met
and Ukrainian officials have repeatedly indicated they would not
recognize it. The claim results from a so-called "take-or-pay"
contract, which makes the buyer pay for a contracted volume of gas,
regardless of the actual amount purchased.
Under a 2009 contract with Gazprom, Ukraine has to buy a certain
amount of gas per year, but in recent years it has bought much less
than agreed. Gazprom has several times claimed that Ukraine must
pay for gas contracted but not purchased--but Ukraine has
refused.
It is not the first time that Gazprom has failed to make one of
its buyers pay for contracted gas. In 2012, Gazprom claimed that
the Czech unit of Germany's RWE did not fulfill its take-or-pay
agreement. However, the European company won a landmark dispute
with the Russian energy giant after a court ruled that it did not
have to pay fines under this clause.
Ukraine, which is struggling through its worst financial crisis
in decades, is heavily dependent on Gazprom's gas. However, Russia
also relies on Ukrainian pipelines to supply nearly a third of
Europe's gas.
In mid-April, President Vladimir Putin warned that Russia could
eventually cut gas supplies to Ukraine if the country failed to pay
its bills, and that European consumers could be affected. The
European Union urged Russia to refrain from such measures.
Earlier this month Russia threatened to make Ukraine pay in
advance for its gas imports, should Kiev fail to pay for the
deliveries and not agree to a higher price. However, it has not yet
introduced a pre-payment system. Russia has--as of April 1--also
raised the cost of gas to Ukraine to $485.50 per 1,000 cubic meters
from $268.50 per 1,000 cubic meters. Moscow said the price increase
was because of Kiev's failure to pay its bills.
Gazprom said Ukraine's debt for delivered gas stood at $2.2
billion in early April and claimed that Kiev should reimburse more
than $11 billion which the country saved as part of a discount
agreement that Moscow recently scrapped.
Ukraine's Prime Minister Arseniy Yatsenyuk said the country
doesn't recognize the price increase, as it goes against a deal
signed late 2013, and will not pay its debt for gas delivery until
the issue of the price is settled.
The prime minister, who has called Gazprom's actions "economic
aggression," warned his country to prepare itself for Russia
switching off gas supplies.
Naftogaz declined to comment.
James Marson contributed to the report
Write to andrey.ostroukh@wsj.com and
alexander.kolyandr@wsj.com
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com
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