Ukraine misses April natural gas payment deadline

08 May 2014 14:52 Source:ICIS

Ukraine has failed to pay its bill for natural gas delivered in April, despite receiving an initial bailout payment from the International Monetary Fund (IMF) on Tuesday, bringing state-owned oil and gas incumbent Naftogaz’s debt to Russian Gazprom to $3.5bn (€2.51bn), Gazprom has confirmed.

Naftogaz had until 7 May to pay for gas supplied during April. Missing this payment will mean Gazprom will start demanding advance payment and will only supply gas to Ukraine in pre-paid volumes ( see ESGM 25 April 2014 ). In April, Gazprom Export’s CEO Alexander Medvedev said Ukraine would have until 31 May to pre-pay the volumes it wants to receive in June. Until 31 May Ukraine would continue to receive gas in line with the current contractual conditions.

The National Bank of Ukraine confirmed to ICIS on Thursday it received the first $3.19bn loan from the IMF under a $17.01bn aid package for the embattled country. A spokesman said over $1bn of this first tranche of loans would be used to replenish the gold and foreign exchange reserves of the bank, with the remaining funds to be channelled into the budget. The bank could not confirm that any funds from the first tranche would be used to pay off Ukraine’s gas bill.

The IMF’s two-year stand-by arrangement targets 2018 for the elimination of Ukraine’s deficit, which would be achieved through reforms to improve efficiency and transparency ( see ESGM 1 May 2014 ).

In the worst case scenario, if no advance payment is made for June, gas deliveries to Ukraine would stop but Gazprom will continue to supply to the Ukrainian border all volumes nominated by its European customers and use an early warning mechanism. The mechanism is a tool set up after the 2009 supply crisis, which Gazprom uses to let the EU know if supplies through Ukraine to Europe are disrupted. Gazprom and EU representatives would also establish joint groups to monitor transit of this gas via the Ukrainian system on to Europe.

Ukraine’s supply contract with Gazprom from 2009 stipulates a 52 billion cubic metre/year supply volume to Ukraine on a 80% take-or-pay basis. Miriam Siers

By Miriam Siers