Gas Tinted by Politics

First Deputy Premier Volodymyr Kuratchenko scathingly criticized Naftohaz Ukrayiny for its performance "in the sphere of settlements for natural gas supplied by Turkmenistan." Interfax-Ukraine quoted Mr. Kuratchenko as saying that "the matter, at first purely economic, is now assuming a political coloration."

Meanwhile, such a hue was present at the very start, for Ukraine had always considered Turkmenian natural gas as an alternative to Russian supplies and as an instrument of price pressure on Russia's Gazprom. However, as usual Ukraine never met its obligations to the partner. It was that way in the days of Respublika, as well as now, when Naftohaz Ukrayiny is headed by former Respublika chief Ihor Bakai.

The temptation to get "cheap" Central Asian gas made President Leonid Kuchma forget his grievances (in 1997 Turkmenistan again suspended gas supplies to Ukraine for non-payment of debts) and bow to President Saparmurat Niyazov. An agreement was reached in December 1998 on the delivery of 20 billion cubic meters of fuel to Ukraine in 1999, and another one five days later in Moscow on transit across Russian territory. And the myth about cheap Turkmenian gas was debunked at once: while it cost $36 per 1000 cubic meters on the border with Uzbekistan, the price rose to $72 at the Ukrainian border. This meant in reality that almost half the gas did not reach Ukraine at all.

Chairman of Russia's Gazprom Rem Viakhirev wrote to the Russian State Duma at the time that "the loss of a part of the Ukrainian market will inflict no real losses on Russia and Gazprom." And how! Gazprom intends to receive $300 million from Ukraine for this transit, 40% in gas and 60% in cash. However, Ukrainian Ambassador to Turkmenistan Vadym Chuprun even then doubted the ability of Ukraine to ensure hard-currency payments. In his words, Ukraine's total debt to Turkmenistan had reached $457.5 million by the beginning of 1999, and Turkmenistan was to receive from Ukraine $173 million in 1999 as part of rescheduled debt payment. Nevertheless, in December 1998 relations between the two countries, always on the verge of breaking off because of Ukrainian debts, were suddenly elevated to strategic partnership. A relevant program was planned to be signed in Kyiv in March 1999.

However, precisely in March the government of Ukraine at last became aware of its inability to pay its Turkmenian gas bill. Prime Minister Pustovoitenko immediately said that Ukraine would stop receiving Turkmen gas from April 1 for this reason. But, as we were told by Naftohaz sources, the pipeline is not being shut off on our side.

But, wonder of wonders, Naftohaz Ukrayiny has only a very hazy idea of what it owes. For example, according to Interfax-Ukraine, in the first quarter Turkmenistan supplied 6 billion cubic meters of gas, and the related debt was, in the words of Mr. Bakai, $240 million as of mid-April. About the same time, on April 21, Mr. Niyazov (as reported by Moscow's Interfax) identified Ukraine's debt as $223 million, including $112 million in hard currency. But as early as May 4, it turns out at the meeting with First Vice Premier Kuratchenko that only 4.2 billion cubic meters had been supplied, but at a cost of $308 million (UNIAN), including $99.1 million to be paid in hard currency (out of which $11.5 million has already been paid). The supplies, according to Mr. Kuratchenko, have not yet started.

The Turkmenian side's reaction is ambiguous. As reported by Ukrainski Novyny, it does not agree to cut back the supplies, for the contract is still valid. According to an Intera Ukraine source, the Turkmenian gas still features in the plan for May.

Kyiv's reaction is quite in character. The Economy Ministry, according to a knowledgeable source, affirms that Ukraine cannot afford and hence does not need the Turkmenian gas. The Premier ignores this, while Naftohaz says the Turkmenian gas will be handled by commercial entities from this fall onwards. The Economy Ministry swallows the bitter pill and estimates in silence the increased public debt.

Meanwhile, the President of Turkmenistan has also attached a political coloration to the question of Ukraine's new gas debts and, as the Ukrainian Ministry of Foreign Affairs said, postponed his visit to Kyiv. To translate this from diplomatese to the vernacular, it sounds like a divorce. What kind of strategic partnership can there be with a country that has the image of a permanent deadbeat?
  COMMENTARY Ukraine's decision to decline the supplies of Turkmenian gas looks bewildering: was it worth fighting since April 1997 for the right to get it, only to stop, allegedly on a voluntary basis, the deliveries now that it is time to replenish underground gas reserves? In general, even references to the growing indebtedness do not make a serious impression. For the state has not lifted a finger to create a system of financial responsibility for contracts signed. It may be pointed out that on April 15, 1999, the Cabinet passed a resolution On Maintaining Discipline of Gas Supplies and Improvement of Payments for the Natural Gas Used, aimed at what is called "stabilization of the financial state of oil and gas enterprises." Indeed, one should not ignore such a resolution and its impact on Ukrainian-Turkmenian gas relations. However, this resolution is unlikely to have anything to do with the mechanism to reduce the debt for gas. The point seems to be something different. All the experts The Day polled point out that the main motive behind the resolution is monopolization of the gas market under the roof of Naftohaz Ukrayiny. In particular, the resolution instructs industrial users only to buy gas from direct importers. The exceptions are the dealers of Naftohaz Ukrayiny. This company is in fact authorized to sell gas at its discretion both via its subsidiaries and dealers.

Then why does the company refuse additional gas after gaining considerable privileges? Perhaps the Turkmenian gas really is too expensive for Naftohaz to carry out its own commercial operations. Or maybe some contractual clauses no longer suit the company or its political protectors. It is rather difficult to say something more concrete (i.e., economically based) about the anti-Turkmenian action, for there is no answer to the key question that conditions the realities of the gas market: what is the true price of gas (including "free" gas) sold to Ukraine? But this is the most closely-guarded secret of Ukrainian officials!

Iryna KLYMENKO, The Day