Turkmenistan gas will be half of that planned

Neither Russia nor Ukraine will benefit from the VAT that Russia has imposed on imports from Ukraine beginning July 1 “from the standpoint of the political consequences of this decision,” President Leonid Kuchma said during a Komsomolskaya pravda v Ukraine call-in. The president believes this measure would be clear if it applied to all goods. But if it does not apply to oil, gas and, gas condensate, “Russia will gain and Ukraine lose economically.” Mr. Kuchma announced that talks are ongoing with the Russian side to break the impasse and keep this economic problem from turning into a political one. He is confident that Ukraine “will in any case find a way out — but on other markets...”

Meanwhile, Ukraine’s attempt to respond to this economic challenge from Russia by tapping the Turkmenistan natural gas market (the latter is supposed to supply this year 30 billion cubic meters to be raised to 60 billion cu. m. in the future) seems to have encountered serious problems recently. Kazakhstan’s Intergaz state gas transport company has almost halved the transit of Turkmenistan gas to Ukraine since June 26 (the 3.3 billion cu. m. planned to be delivered in July was cut to 1.45 billion cu. m. in a month). This was caused by the debts the Itera Company group has incurred for gas transport. Itera spokesman Nikolai Semenenko explained that the company had repeatedly warned the Ukrainian leadership that the gas debts of Ukraine’s power-generating companies ($56 million) make it impossible for Itera to pay on time for the services it renders to Naftohaz Ukrayiny for the transit of Turkmenistan gas. “As long ago as last winter the Ukrainian leadership promised to pay off the debts, and we have been making deliveries on their word of honor,” the Itera spokesman said.

In reply, Naftohaz Ukrayiny officially notified Gazprom that it would siphon off the needed gas from transit pipelines. The Moscow-based Nezavisimaya gazeta reports that Volodymyr Trykolych, first deputy chairman of the Naftohaz Ukrayiny board of directors, sent an official letter to Vasily Fadeyev, a Gazprom director, and Mikhail Potepenko, vice president of Itera, in which he informed them that “from July 7 the company will siphon off a daily 10 million cu. m. of gas being transported by Gazprom to the countries of Europe.” For this step Naftohaz blamed the Russia’s Gazprom and Itera, especially the latter. Kyiv estimates that Ukraine is now receiving 45 million cu. m. of natural gas a day, including 18.3 million via Itera. This gas goes in two directions: to immediate consumers and to Naftohaz itself. According to Mr. Trykolych, the dwindling supplies resulted in inadequate deliveries to the consumers, which in fact forced the company to siphon off the Gazprom transit gas. On the other hand, Itera claims the consumers had their requirements met thanks to increased supplies of Uzbek and Russian gas. “We have done everything to meet our commitments, but Naftohaz failed to deliver the gas to consumers, cut supplies by 20%, and suggested the latter buy the lacking gas from it,” the company representative said.

In this connection, the Russian press carries very tough comments which mean that, as the winter is coming on, Ukraine will fall, as always, under increased gas pressure.

Meanwhile, Ukrainian experts note that Mr. Trykolych’s letter opens a new page in Ukraine’s natural gas history, a chapter on whether or not Russian gas has been illegally pilfered. Mr. Kuchma said recently in Kharkiv that Russia was accusing Ukraine of this in order to bring home the necessity of building a bypass gas pipeline. It will also be recalled that on December 7, 2000 the Ukrainian and Russian premiers signed an agreement on a new pattern of natural gas supplies whereby Russia is to offer a 2 billion cu. m. seasonal commodity credit. However, this agreement, signed by the Viktor Yushchenko government but not yet ratified by the Ukrainian parliament, allows Russia to acquire Ukrainian privatized property if Ukraine does not meet the payment schedule. Payments that are two months overdue will become part of Ukraine’s public debt, while Russia can utilize this debt to pay for its acquisitions in the course of the future privatization of Ukrainian industrial facilities. As is known, Russia insists that the problem of Ukrainian $1.4 billion gas debts be solved by Naftohaz Ukrayiny issuing eurobonds under Ukrainian government guarantees. The Ukrainian leadership opposes such guarantees for the Naftohaz Ukrayiny debts because this is within the sphere of corporate relations and the problem should be solved at the corporate level. And this level is showing increased confrontation. A Naftohaz Ukrayiny press release says that the Itera International Energy L.L.C., having no natural gas resources of its own, illegally distributed last June a daily 10 million cu. m. of gas to its customers. “Thus with the connivance of Gazprom and Itera International Energy, which wish to escape responsibility for the breach of contractual obligations to Ukrainian customers, an attempt is being made to shift the blame for the current gas supply situation to Naftohaz Ukrayiny,” the company’s press service comments apropos the accusations of illegal gas pilferage from transit pipelines.