28 September 2011
Ukrainian Deputy Prime Minister of Social Policy Sergiy Tigipko said yesterday at a press conference that it is premature to say household gas tariffs will definitely be raised, according to Interfax. A day earlier, Tigipko was quoted as saying the rates could be hiked by yearend in order to cope with pressure from a global economic slowdown. The International Monetary Fund has insisted on Ukraine raising household gas tariffs before resuming its USD 16 bln loan program. Tigipko has been Ukraine’s lead negotiator in talks with the IMF. Brad Wells: Tigipko’s reversal on gas price hikes is unexpected and rare for a Ukrainian politician. We do not believe it implies any negatives in Ukraine-IMF relations, but rather a level of frank honesty reflecting the difficulty with which the Ukrainian government is approaching a possible increase. Our base case envisages a household gas tariff hike in late October-November, with low-cost IMF financing looking more and more attractive to the government. We expect similar conflicting messages from Ukrainian politicians in the next few months until a firm decision is made from atop the power vertical.