Purchasing “Naftogaz” of Russian gas for Ukraine is fraught with new debts

As stated by the head of Board of “Naftogaz” Andrey KOBOLEV, Ukraine will resume purchases of Russian gas, as the price of a thousand cubic meters proposed by Gazprom, more attractive than the cost of fuel supplied from the EU. Experts believe that this is an emergency measure, because the fuel shortage in the Square continues to grow. However, because of the extra money on new purchases Kiev did not have, he will again have to incur debts in front of Russia, which our country will again be forced to recover in foreign courts.

Return to the import of Russian gas to Ukraine was announced at the end of December 2017. Then, after two years of abandonment of natural gas from our country, Ukrainian President Petro Poroshenko said that in 2018, thanks to the decision of the Stockholm court, Kiev will once again be able to buy Russian gas. The head of The Square were happy with the verdict of the EU, relieving of necessity to pay the penalty for shortfall gas under the terms of take or pay (“take or pay”).

In accordance with this rule, even when the cues did not buy Russian gas, its debt grew by the end of last year it exceeded $56 billion of Stockholm decided not to recover these funds from Kiev, because the demand for take-or-pay doesn’t fit into modern realities.

Poroshenko said that the decision of the Stockholm arbitration “historic victory” and said that his country has “jumped the gas with the hook.” However, the President of Square is clearly disingenuous, making such statements. In January–October 2017 Ukraine purchased on the external market 20 billion cubic meters of gas or a quarter of the volume consumed by the country.

Assessment Andriy KOBOLEV, the absence of a mediator in gas deals with Moscow will allow Kiev to save up to $100 per thousand cubic meters, or up to $2 billion a year.

Moscow is able to provide Ukraine with fuel. Gas export to Russia for 11 months of 2017 amounted to about 189 billion cubic meters against 178 billion over the same period, 2016 (growth of more than 6%). However, the price of Russian gas is not standing still. According to the Deputy head of “Gazprom” Alexander Medvedev, the average cost of export of blue fuel from Russia to Europe by year-end 2017 could rise to $200 per thousand cubic meters. It is 7-10% more than last year. Given the high cost of oil, which affects gas quotes after a few months, the prices for export deliveries from Russia could grow by another 10-20%.

Even if Kiev will be forced to return to the imports of Russian fuel, funds for these purposes, it may not be. According to “Ukrtransgaz”, from the beginning of the heating season, the consumers of the country “burned” at least 800 million cubic meters of fuel. Now the stocks of raw materials in the Ukrainian underground gas storages reduced by a few percent per week and not exceed 16 billion cubic meters. This amount is barely enough to ensure stable transit of Russian gas through Ukrainian territory to EU countries.

The burden for the purchase of Russian natural gas, the replacement of which failed to find Kiev once again going to impose on the population. The Cabinet of Ministers of Ukraine is preparing a resolution on the increase in gas prices for ordinary consumers, according to the method of which from 1 April 2018, the price of fuel will rise by more than 8%.

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