Gazprom Resumes Gas Supplies to Ukraine

Gazprom resumed gas supplies to Ukraine yesterday. Russian president Vladimir Putin, his counterpart Victor Yushchenko and the heads of Gazprom and Naftogaz of Ukraine reached an agreement in a conference call. In particular, Naftogaz agreed to pay in full for gas deliveries from January 1 to March 1, at the price effective on January 1 (USD 179.5/tcm). No other details were disclosed; talks will reportedly continue next week. In related news, Prime Minister, Yulia Tymoshenko said that Ukraine would allow Gazprom to sell 1.25 bcm of gas annually within the country. Earlier this week, Gazprom cut deliveries to Ukraine by 50% as the parties could not find a compromise on gas supply schemes and debt settlement. Vladimir Nesterenko: Such a quick resolution could mean that the parties turned back to the agreements reached by two presidents in February this year, which assumed abandonment of the scheme involving RosUkrEnergo and Ukrgaz-Energo, and shifting to two new JVs owned directly by Naftogaz and Gazprom. We keep our view that currently one of the key issues in Russia-Ukraine talks is Gazprom’s share of the Ukrainian market. Quick resumption of gas supplies indicates the Ukrainian president could have made a generous offer to Gazprom. Although it contradicts Tymoshenko’s announcement that Gazprom will be allowed to sell only 1.25 bcm of gas in Ukrainian market, we believe this figure is far from final, as Gazprom is unlikely to agree.