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Gazprom Says Dispute With Kiev Threatens Gas Exports to Europe

Disagreements with Kiev could potentially disrupt Gazprom’s gas exports to Europe through pipelines transiting Ukraine, the energy giant has said.

MOSCOW, April 29 (RIA Novosti/PRIME) – Disagreements with Kiev could potentially disrupt Gazprom’s gas exports to Europe through pipelines transiting Ukraine, the energy giant has said.

“The political and economic contradictions between Russia and Ukraine have called for concern in regard to the reliability of gas deliveries to Europe through Ukraine and Gazprom’s Ukrainian counteragent’s ability to pay its debts for delivered gas and payment for current gas deliveries,” Gazprom said in a statement made under International Financial Reporting Standards.

Gazprom fears that Ukrainian state-run gas company Naftogaz could fail to fulfill its commitments on gas transit, siphoning off gas destined for European consumers.

According to Gazprom, the escalation of the conflict over Ukraine and the international sanctions against Russia could negatively affect the financial situation of the company and limit its ability to attract loans abroad.

New hotbeds of tension or the escalation of the ongoing conflict and the introduction of international sanctions may lead to the lack of confidence of international investors in the region’s economy and investment in Russia in general.

The result could be a loss of liquidity, instability of commercial activity and a significant decrease in prices on securities of companies operating in Russia, including Gazprom, in addition to an inability for the company to attract borrowed or stock capital on the international capital markets, the company said.

“A big part of Gazprom’s revenues and obligations are in American dollars and euros. Broadening or imposing new sanctions against Gazprom may have a significant impact on the activity, the financial position and the operations results of the Holding Gazprom,” the statement said.

To reduce these risks, Gazprom in particular is taking active steps to broaden its sales markets. One of the group’s major projects is the Eastern program, envisaging supplies of Russian pipeline gas and liquefied natural gas to export markets in Asia-Pacific region countries.

In an effort to reduce dependence on the gas transit countries, Gazprom is switching to generally accepted principles in the international gas business and market pricing mechanisms for gas exports to ex-Soviet states and their transit services, the statement said.

Gazprom is fulfilling gas projects aimed at diversifying export routes, including the Nord Stream and South Stream projects, and is expanding opportunities to use underground gas storage facilities abroad and also developing liquefied natural gas trade.

Kiev currently owes Gazprom $2.2 billion. Amid the current political standoff between Kiev and Moscow, Gazprom has cancelled two major gas discounts for Ukraine, bringing the price from $268.5 to $485 per thousand cubic meters starting April 1. The payments for March deliveries to Ukraine have still not been received.

Over the past five years, Russia has supplied Ukraine with nearly 150 billion cubic meters of gas. Ukraine has systematically delayed payments for the imports. Russian President Vladimir Putin said earlier this month that Ukraine owes Russia $17 billion in gas discounts, with another $18.4 billion incurred as a minimal take-or-pay fine.

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