Gazprom Bills Ukraine $1.7 Billion as June Deadline Looms

OAO Gazprom (OGZD), Russia’s natural-gas exporter, sent Ukraine a bill for an estimated $1.7 billion of imports next month, saying it will cut off supplies if the neighboring country doesn’t start paying in advance.

Ukraine’s June bill was based on average deliveries of 114 million cubic meters a day, at the second-quarter price of $485 per 1,000 cubic meters, Sergei Kupriyanov, a spokesman for Gazprom in Moscow, said today.

Payment is due by June 2, and starting from the following day, Ukraine will only get what it pays for, Kupriyanov said.

“Russia is to stop to use natural gas as a new type of Russian weapon,” Ukrainian Prime Minister Arseniy Yatsenyuk said today in Brussels. “We are ready for the market-based approach.”

Ukraine depends on Russia for about half its gas, making energy a battleground in the wider struggle between the two countries. Because 15 percent of the European Union’s gas passes through the Ukrainian pipeline network, a cutoff could disrupt shipments to the rest of the region.

A Snapshot of Ukraine's Past and Future

Gazprom’s demands are a “premature signal,” Vygaudas Usackas, head of the EU delegation to Russia, said in an interview on Bloomberg Television today. The EU is “eager” to work with Russia to calm the Ukraine crisis, he said.

Russia’s relations with the U.S. and EU have sunk to the lowest since the fall of the Iron Curtain. They have backed the Ukrainian government in accusing Russia of fomenting unrest in the country before a presidential election on May 25.

IMF Aid

Ukraine has the ability to pay off at least part of its debt after receiving the first $3.2 billion of a $17 billion International Monetary Fund aid package last week, Russian Prime Minister Dmitry Medvedev said yesterday. He ordered Gazprom to send Ukraine a June bill, as the company claims $3.51 billion in overdue payments for fuel delivered in 2013 and through April. NAK Naftogaz Ukrainy, the state oil and gas company, doesn’t recognize the full debt.

Ukraine has been boosting imports of Russian gas since April 17, the day Russian President Vladimir Putin first warned of the impending move to prepayments and possible disruptions in fuel supplies to Europe.

The smaller country imported the most Russian gas since February on May 11, according to the Energy Ministry in Moscow. Imports are running at more than four times the average for the same time last year as the June deadline approaches.

Honest Price

Naftogaz has received Gazprom’s invoice, Aliona Osmolovska, a spokeswoman for the company, said by phone from Kiev without elaborating.

Ukraine refuses to prepay for Russian gas at the second-quarter price of $485, Energy Minister Yuri Prodan said last week in Kiev.

If Gazprom returns the first-quarter price for gas to $268.5, “Ukraine in 10 days will urgently repay gas bill arrears,” Yatsenyuk said. “But first, we need to sign the deal, and only afterwards ask for arrears.”

Russian EU, and Ukrainian energy officials met yesterday in Brussels to agree on the timing and place for their next round of three-way gas talks after meeting in Warsaw on May 2 without reaching an agreement.

“Our delegation is still in Brussels,” Osmolovska said. “We expect that an official statement will be made after they come back tomorrow.”

The gas conflict may intensify as Ukraine prepares for the May 25 election, which Russia has opposed, saying the country should first carry out constitutional reforms and provide more autonomy to its regions.

“Gazprom simply can’t reach an agreement with Ukraine,” billionaire Dmitry Firtash, who made his fortune importing gas to the country with the Russian company, said in an interview in Vienna. “That is because Gazprom’s business is politics.”

To contact the reporter on this story: Elena Mazneva in Moscow at emazneva@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net Alex Devine, Tony Barrett

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