Even warm winter will not save the deadbeats

On the eve of Epiphany frosts (Epiphany is celebrated on 19 January according to the Julian calendar, and it was not improbable that, despite forecasts of warm weather, we in fact got a light frost). Meanwhile, the ITERA international group terminated natural gas deliveries to four Ukrainian generating enterprises. The group’s press service told The Daythat such a harsh measure was taken because of its Ukrainian partners failure to pay for the gas they had consumed. On January 15, the debt of four Ukrainian energy companies amounted to $64.2 million: Donbasenerho $9.4 million, Zakhidenerho $13.6 million, Dniproenerho $13.9 million, and Tsentroenerho $27.2 million. According to the press service, notices of the impending termination of gas supplies were sent in advance to the power companies in the beginning of January, but no measures were taken to pay the accrued debt.

Deputy Head of Press Service for Russia’s Gazprom Anatoly Babayev had no comment on the ITERA decision and did not answer the question whether Gazprom will compensate Ukraine for short supplies of gas to its energy companies pursuant to the recently signed intergovernmental agreements on banning the unauthorized extraction of gas by Ukraine. He said, “ ITERA is in charge of all matters of gas supplies to Ukraine.”

ITERA Press Service Director Nikolai Semenenko told The Day that as a private company ITERA “has direct contacts with the Ukrainian power companies while the international agreements in this case seem to be taken out of context.” According to him, gas supplies to Ukraine will not be cut in the physical sense since there is no technical way to do so. Mr. Semenenko also stated that, as a result of termination of gas supplies to these companies, the volume of gas used by them in the future will be considered unauthorized extraction.

When answering the question about the price of such unsanctioned natural gas, he replied, “This is not our decision, because in this case they will not use our gas. They extract Russian gas, which is supplied through a common pipe, and we stop the accounting of our gas.” In this connection Mr. Semenenko also opined that, as a result, the recently signed intergovernmental agreement on gas stand-by credits will come into force, but added, “This is not a question for us.” The press service director also told The Daythat in December and January ITERA increased the volume of gas supplied to the Ukrainian power companies “proceeding from their requests for such supplies in the fall and winter period and their promises to pay on time.”

Let us recall that on December 21 in Moscow bilateral agreements were signed with the aim of banning the so- called unauthorized extraction of the Russian export gas intended for Europe. In brief, it means that Moscow no longer believes the childish promises of Kyiv like “I will never do it again” and is imposing tough sanctions for every cubic meter of natural gas consumed without payment. At the first stage, excessive consumption of gas will be included in the technical stand-by credit at the price of $80 per thousand cubic meters of gas, half in the form of current payments with the other half becoming part of the national debt. In a physical sense, this gas will be deducted from payments for the transit of Russian gas through Ukrainian territory.

It seems that this diddling with the Russian gas tap proves first of all that, contrary to statements by the Ukrainian government and fomer energy vice premier on improvement of the situation in the sphere of payments for energy, Ukraine is not able to make such payments in full even now when the winter is unusually warm. However, a source in Naftohaz Ukrayiny (Oil & Gas of Ukraine, a state-owned monopoly) noted that such a state of affairs could also mean that Russia is attempting to test the effectiveness of the mechanism specified in the gas agreements and aimed at banning the unauthorized siphoning off. According to the source, it is also possible that Russia is trying to pressure Ukraine in the current gas negotiations between Gazprom and Naftohaz Ukrayiny.

It is interesting to note that, almost simultaneously with ITERA, the issue of gas defaults was also raised by Naftohaz Ukrayiny. The company stated on January 15 that from that day on it would supply users only the gas they paid for. A source there said, “Beginning from 15 January, the level of consumption of natural gas will be brought to the level of paid volume within two days. Gas experts believe that the reason for such harsh measures, taking into account the winter period, is the low level of payment for the gas consumed in the first ten days of January. According to Naftohaz Ukrayiny, only 9% of the gas consumed was paid for in Rivne oblast, 7% in Kharkiv oblast, 6% in Volyn, and 3% in Kherson oblast. This is not a temporary phenomenon since Naftohaz is no longer able to provide free loans for the users like it did during the holidays. At that time, the heat-supplying company, population, and state- owned institutions had enough gas. Company managers believe that it will no longer be possible to effect such advance payments as a result of gas defaults.

Naftohaz Ukrayiny proposed that the government of the Republic of the Crimea, heads of regional and city administrations, and managers of heating companies urgently pay for the volume of gas they consumed in January 2001 and allocate the funds to buy gas for the state- owned institutions also to pay for the benefits and subsidies due the population. On January 16 the National Commission for Regulation of Electrical Energy extended the emergency situation on energy market to the end of the month. The commission’s public affairs office informed Interfax-Ukraine that the decision to prolong the emergency situation had been taken pursuant to a government order following requests submitted to the Cabinet of Ministers by the ministries of fuel and power and of emergenies.

COMMENTARY

Yuri ZBITNIEV, President, RTV Co.

“The power companies have paid ITERA much less for gas than have other users. Thus when the Russian Gazprom cut the volumes of gas supplies to ITERA, the latter took it out on the companies that are the biggest debtors. I believe that now ITERA will do its best to demonstrate its desire to get the money from Ukrainian users not only because it is interested in such money, but mainly to prove the effectiveness of its work to Gazprom. Besides, in the next several months we will witness some very interesting events that will more clearly indicate the places of ITERA and Gazprom on the gas market. Such events will obviously affect the Ukrainian gas market. It is also possible that new players will appear that will either compete with ITERA or even push it out of our market. Such players might be represented by a state-owned company, since Russia is concerned over budget revenues and has decided to take control over the sectors that are really able to increase revenues. It seems that Russia as a state has decided to share the gas profits with no one. In any case, Ukraine will have to pay.”