Gazprom gives Ukraine USD 1 bln prepayment for natural gas transit

Russian state natural gas monopoly Gazprom (GAZP RM) decided to make one more advanced payment (USD 1 bln) to Naftogaz of Ukraine (NAFTO), the state gas production and distribution monopoly, to cover transit costs, according to a Gazprom press release on June 26. Since 2012, Gazprom has wired to Naftogaz USD 5.15 bln, which covers the cost of gas transit till early 2015, according to Gazprom estimates.

Alexander Paraschiy: Ukrainian authorities are in a hasty search for alternatives to cover the state’s currency deficit. Talks about QE tapering have made it difficult for the Cabinet to raise money from abroad. In this respect, we see the deal with Gazprom on prepayment as an effort to reduce a minute-by-minute currency problem. As Gazprom has already prepaid for gas transit for 1.5 years in advance, this source of currency inflow looks exhausted for the future. Thus the prepayment creates a one-time cash inflow that will be translated into a larger currency deficit over the next year and a half – yet another driver of devaluation pressure for hryvnia in the near future.