Ukraine faces new Gazprom crisis as debts mount

10:25, 20 February 2009
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Naftogaz may be unable to pay Gazprom for further supplies?

A new gas crisis between Ukraine and Russia loomed yesterday after Naftogaz gave warning that a “catastrophic” increase in payment problems by its customers may leave it unable to pay Gazprom for further supplies, Times Online reported.

The Ukrainian utility is struggling to get its customers to pay for gas and the threat of a new confrontation with Gazprom over unpaid bills adds to the trouble of Ukraine`s economy, which is crippled by debts and the collapse in its industrial base.

Naftogaz agreed a new gas deal with its Russian supplier last month, ending a long confrontation and a supply cut. However, the Ukrainian company signalled yesterday that cash was again running out.

“Naftogaz announces that the situation as regards paying Gazprom could worsen because of the catastrophic rise in debts of regional utility companies,” the company said.

It is believed to be owed 4.6 billion hryvna (£385 million) by local distributors that have been unable to secure payment from households.

A resumption of payment problems with Gazprom could precipitate a new confrontation between Moscow and Kiev, leading to further supply cuts and tougher demands from Gazprom for control over the transit pipelines in Ukraine.

Naftogaz pays for gas monthly with one week in arrears under the ten-year supply deal, agreed last month, but the contract includes a clause that switches the terms to prepayment if Naftogaz is late on a single payment.

A demand for prepayment would be unlikely to be met by the Ukrainian utility and might lead to further demands from Gazprom. The Russian gas company would not comment last night on the warning from Naftogaz about payment problems.

Ukraine has been plunged into a downward financial spiral after a collapse in demand for its commodity exports and in its currency`s value.

The outlook has worsened after a decision by the International Monetary Fund to withhold the second tranche of a $16.4billion emergency loan because Ukraine had failed to comply with the terms of the loan.

Viktor Pynzenyk, Ukraine`s Finance Minister, resigned after a row with Yulia Tymoshenko, the Prime Minister. Mr Pynzenyk said that he had become a hostage to politics and he is believed to have disagreed with the Government`s budget.

The Ukrainian Government has been riven by the continuing rivalry between the Prime Minister and Viktor Yushcehnko, the President.

Ms Tymoshenko shrugged off the resignation of the finance minister, suggesting that he was not strong enough. “The weakest are leaving their combat positions,” she said.

Ukraine is among the countries that have been hit the worst by the global financial crisis.

Its economy is expected to contract by about 6per cent this year, according to analysts, after years of impressive growth. Industrial output slumped by 34.1 per cent in January, year-over-year, the biggest fall in the country`s history.

The hryvna, the national currency, has lost 40 per cent of its value since last autumn, because of a drastic fall in exports. The hryvna continued to fall yesterday, trading at 8.5 to the dollar at the foreign currency exchange, down from 4.9 in September.

Ukraine`s stock market rose yesterday by 2 per cent after falling 8.1per cent to its lowest point in more than four years on Wednesday.

Times Online

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