Gazprom Threatens to Cut Gas Supplies To Ukraine

Gazprom announced yesterday that it would curtail exports of natural gas to Ukraine, unless Kyiv pays of an alleged USD 1.3 bln debt for gas already delivered this year by the end of October. Fuel & Energy Minister Yuri Boyko and current Prime Minister Viktor Yanukovich are traveling to Moscow for consultations with Gazprom. Former Prime Minister Yulia Tymoshenko has called for a criminal investigation into how the debt was amassed. Vladimir Nesterenko: The debt to Gazprom is surprisingly high, and we wonder why the monopoly did not warn Ukraine earlier, but waited until just after the end of the elections. The fact that the PM and the fuel and energy minister are heading to Moscow, suggests this was also a surprise for the government. The timing of the announcement seems politically driven, and if the future coalition does not include the Party of Regions (which at this point looks likely), tensions on the gas matter similar to those at the end of 2005-early 2006, could pop up again. We consider Gazprom’s warning as a signal that gas price next year could be higher than we expected (USD 140-160/tcm), potentially reaching USD160-180/tcm, in the worst scenario – USD 200/tcm.