Gazprom Threatens To Raise Gas Prices For Ukraine

Gazprom is insisting Ukraine switch to paying European-level prices for gas deliveries beginning in 2006, which would raise prices from USD 50 per 1000 cm to USD 160 per 1000 cm. Gazprom also demands that all settlements be made in cash, not barter. Naftogaz has suggested both parties honor the previous agreement and maintain current gas prices until 2013. Within this agreement, Ukraine would charge a low tariff for the transit of Russian gas to Europe at USD 1.09 per 1000 cm per 100 km, and Russia would supply 23 bn cm of gas in return at a price of USD 50 per 1000 cm. If the agreement is violated by Gazprom, Naftogaz is threatening to raise tariffs for Russian gas transit three fold. Concorde Capital:We expect the parties will find a temporary compromise, but we also anticipate Russian gas prices to rise to USD 80-100 per 1000 as a result. This will be detrimental to Ukraine?s industrial gas consumers, especially the chemicals industry. A break-even gas price for Ukrainian fertilizer producers is estimated at USD 80 per 1000 cm. Negative for Dniproazot (DNAZ: BUY) and STIROL (STIR: BUY.)