Naftogaz Gazprom Gas Conflict Resolved.

Both parties confirmed that the issue concerning the 7.8 bln cm of gas that, according to Gazprom, had been missing, is now over. According to the agreement between Gazprom and Naftogaz, 5.25 bln cm of gas are to be passed by Naftogaz to RosUkrEnergo in 2005 – 2006. The remaining 2.55 bln cm of gas will be available for Ukraine’s use and treated as a partial payment for Russian gas transit. At the same time, Gazprom will increase gas transit through Ukraine’s territory by 8 bln cm in 2005 and by 8-11.5 bln cm in 2006. Concorde Capital: The conflict resolution must have to do with Naftogaz’s attempts to find alternative gas suppliers. Besides, the seeming ease with which both companies found a compromise suggests that the very conflict itself was in many respects an ?information war? on the part of Gazprom, who did not want the intermediary RosUkrEnergo to be removed from gas export schemes. The news is positive for Ukraine, as it removes the threat of a gas deficit. However, we continue to believe that gas prices are going to rise in the future.