Ukraine wont pay fine to Gazprom, willing to raise gas tariffs

The Ukrainian government is ready to lift residential gas tariffs to remove the main impediment to a deal with the IMF, Foreign Affairs Minister Leonid Kozhara told the Wall Street Journal in an interview published on Jan. 30. Earlier last month, PM Mykola Azarov suggested that might happen in comments to international businessmen.

Kozhara also said the Ukrainian government isn’t going to pay a USD 7 bln natural gas bill that Gazpron is demanding for allegedly breaching a 2012 take-or-pay agreement in 2012. Meanwhile, state gas producer and trader Naftogaz (NAFTO) was less straightforward on Jan. 31, stating on its website that it will consider Gazprom’s claim in due time, has sent a reply, and is going “to solve all the issues related to the contract in accordance with its clauses.” Gazprom has yet to respond.

Alexander Paraschiy: So far, Ukraine’s officials are speaking about boosting gas tariffs only when addressing an international audience. It will take a little time before they start to treat this option seriously and address it with Ukrainian citizens. Our argument is the Ukrainian government has no option but to deal with the IMF, which implies its officials will make concrete commitments that include a household gas tariff hike by mid-spring.

The state’s reaction to Gazprom’s fine looks a bit puzzle-headed and we are likely to see the conflict will develop in the coming days.