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Gas games in the Kremlin and an inadvertent favor for Tymoshenko
Roman Kupchinsky, 20/10/2007 06:00
 Sergei Kupriyanov, Gazprom's spokesman, shocked Ukrainians and other Europeans on Oct. 2 when he declared that Ukraine owed Gazprom $1.3 billion and threatened that unless this debt was paid by the end of October, gas deliveries to Ukraine would be reduced. |
The message was not delivered to the Ukrainian government in advance by the Russian Ambassador, Viktor Chernomyrdin, as protocol dictates, but was announced on Russian television.
Official Kyiv, however, had never signed a gas purchasing contract with Gazprom or the Russian government and Ukrainian officials immediately questioned not only Gazprom's motives, but its right to demand any payment whatsoever from the Ukrainian government.
The website of RosUkrEnergo clearly states: "ROSUKRENERGO is financial guarantor for Gazprom, to which it makes the appropriate payments for natural gas supplied to Ukraine."
The next shock came on Oct. 8 when Russian Prime Minister Viktor Zubkov announced that the debt had grown to $2 billion by early October.
Russian President Vladimir Putin had to jump in and correct his new prime minister by saying that the Ukrainian portion of the debt was only $1.3 billion.
If any money was owed to Gazprom, it was by UkrGazEnergo, a joint venture established in 2006 between RosUkrEnergo (RUE) and Naftogaz Ukrainy (NAK) and by RUE, Ukrainian officials stated, distancing the government from the financial machinations by the two middlemen companies.
RUE was created in 2004 by Gazprom with the active participation of former Ukrainian president Leonid Kuchma, Russian President Vladimir Putin, Yuriy Boyko, the then-head of Naftogaz Ukrainy and a Ukrainian businessman, Dmytro Firtash.
Soon after Kupriyanov's announcement, Ukrainian Prime Minister Viktor Yanukovych's Energy Minister, Yuriy Boyko, was dispatched to Moscow to sort out the issue with Russian Deputy Prime Minister Dmitriy Medvedev, who is also chairman of the board of Gazprom.
One can only imagine the tone of the conversation that took place between Boyko and Gazprom officials.
Boyko announced after his meetings with Medvedev and Alexei Miller, the CEO of Gazprom, that the entire debt would be paid by Nov. 1.
The following day he assured European Commissioner for Energy Andris Piebalgs that Ukraine is pledged to remain a reliable transit country for gas exports to the EU.
Piebalgs, however, has proven to be a very knowledgeable commissioner. It is doubtful that he would believe everything he hears from Boyko with the latter's soiled reputation.
Since the Ukrainian government had never agreed to underwrite any debts incurred by either RUE or UkrGazEnergo, it was difficult for the Yanukovych government to come to the rescue of UkrGazEnergo. They would need to find the money elsewhere.
RUE spokesman Andriy Knutov told the press that "UkrGazEnergo has failed to pay us more than $1 billion for gas supplied." RUE owns 50 percent of UkrGazEnergo (making Firtash a 25 percent owner in the company), while Naftogaz owns the other 50 percent.
UkrGazEnergo meanwhile stated that "Naftogaz failed to pay a significant sum for gas supplies. This is the nature of the debt to Gazprom."
How large is Naftogaz's debt to UkrGazEnergo?
According to Delo, Naftogaz Ukrainy's communal customers owed the company $150 million. It is possible that Naftogaz had not been paying its partners for some time and might have accumulated a far greater debt than what their customers owed them. Later it was revealed that NAK owed UkrGazEnergo about $700 million.
The mystery deepened when RUE spokesmen claimed that their part of the debt was for gas being held in Ukrainian underground storage facilities. RUE, it seems, was having difficulty in obtaining credits from banks to pay Gazprom for some 8.5 billion cubic meters it had accumulated in Ukrainian underground storage facilities. Presumably, this gas would be sold in the coming months and they would pay for it in cash.
The agreement signed on Oct. 8 required that the 8.5 bcm of gas belonging to RUE in Ukraine's underground storage facilities be returned to GazpromExport. This would absolve RUE of its debt.
Many questions have arisen not only over the agreement signed in Moscow by Boyko - an agreement which has not been made public - but the main question is why such a large debt was so suddenly discovered by Gazprom?
Putin, was quoted by ITAR-TASS as saying: "The large debt was totally unexpected."
It seems highly unlikely that Gazprom, Boyko or Putin would be surprised that RUE owed Gazprom over $1 billion. RUE is a company where three powerful members of Gazprom's management committee serve on the board.
One is Alexander Medvedev, the deputy head of Gazprom's management committee and the head of GazpromExport. The others are Valeriy Golubev, in charge of sales to CIS countries, and according to sources in Russia, a moneybag man for the Kremlin for many years and Konstantin Chuichenko, the head of Gazprom's legal division and co-director of RUE. Both men are former KGB operatives. It stretches the imagination to believe that they did not report RUE's growing debt to Gazprom.
It appears that Boyko knew of the debt months in advance and understood that it had to do with ownership of gas stored underground. He remained silent, knowing that any sunshine on this would only benefit the election campaign of Yulia Tymoshenko, and instead tried to preempt criticism by boasting that Ukraine's old salt caverns were full of gas which, he claimed, could only be sold to Ukraine.
But most of this gas belonged to RUE, and to Firtash, and not to Naftogaz Ukrainy. Nothing would prevent them from selling this gas to their European customers.
Firtash's Hungarian company, EMFESZ for example, is a major buyer of gas from RUE, which it then resells to Poland and on the Hungarian domestic market.
RUE spokesmen placed the blame for their portion of the debt on the world credit crisis, but another factor that might have prevented them from obtaining credits is the reputation of the company and its creditworthiness.
German business crime expert Helmut Gorling recently told Stern magazine: "When a company's structure becomes overly complicated, there has to be a reason. If you can't see any necessity for it, it starts to look suspicious."
Behind the scenes, another drama was being played out. Reliable sources in the Russian gas industry claim that Gazprom and others are highly upset at Firtash and want him out of the business. These sources maintain that Firtash-owned companies had accumulated a $2 billion debt to RUE and that he was avoiding payment.
This is not the first time that Firtash has had problems of this sort. He is alleged to owe Itera, a Russian gas company, some $28 million dollars.
Firtash's firmest supporters in Kyiv - Boyko, his deputy at the energy ministry Vadym Chuprun and Serhiy Lyovochkin, Viktor Yanukovych's chief of staff - apparently fear that if Firtash is removed from RUE, their lifestyles would undergo a substantial change. If Firtash pays his debt, the reasoning goes, the RUE money flow would continue - unless Yulia Tymoshenko puts an end to it all.
Yanukovych himself has officially stated that RUE is "fully transparent." The prime minister appears to depend more on Boyko and Lyovochkin, and not on law enforcement organizations, for his information about RUE.
It might not be pure coincidence that the debt issue arose after Germany's Stern magazine in mid-September described the murky apparatus set up by Gazprom managers to transfer huge amounts of cash from various operations in Europe through Cyprus-registered companies. Stern named a member of the RUE board, Hans Baumgartner, a Swiss lawyer, as one of the key participants in the scheme.
The irony of the situation is that Gazprom did a great favor for Yulia Tymoshenko by exposing its anger at Firtash, and strengthened her hand in her campaign to rid the Ukrainian gas business of Firtash and his lobby.
Roman Kupchinsky is the former director of the Ukrainian Service of Radio Free Europe/Radio Liberty.
Source: Kyiv Post, October 17, 2007.
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15/08/2008 15:48
