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GISMETEO.RU
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Ukraine faces gas supply ‘perfect storm’
Journal Staff Report

KYIV, Oct 15 – Ukraine is facing a “perfect storm” with natural gas supplies early next year due to low gas storage levels and Gazprom’s hardball tactics, former head of the State Tax Service Serhiy Verlanov warned.

The government’s “anti-reform and anti-market measures” cut the national energy company Naftogaz from international capital markets, worsening its liquidity, and causing Ukraine’s gas imports to plunge 84% this year, he said.

The measures make Ukraine “vulnerable with its energy sector teetering on the brink of collapse,” Verlanov wrote in an article published by Seeking Alpha, a U.S. financial information service, on October 13.

Yuriy Vitrenko, the head of Naftogaz, in an interview with Interfax-Ukraine on October 15, admitted the company has liquidity issues while also facing a “non-trivial task” to supply consumers with gas. He blamed a senior company official who quit last month for lower gas imports this year.

The developments come amid skyrocketing gas prices on European markets caused by concerns over gas supplies from Gazprom and by lower-than-usual storage levels. Gazprom has been persistently refusing to book any additional capacity for gas supplies to Europe via its main routes.

The European Commission is looking into complaints that Gazprom is using its clout to propel gas prices.

Meanwhile, Ukraine’s low gas storage levels were caused by Naftogaz’s inability to raise money from international capital markets. Naftogaz was forced to cancel an issue of Eurobonds due to investors’ concerns the government had backtracked on its commitment to corporate governance principles, Verlanov said.

The government replaced Andriy Kobolev, a top reformer in charge of Naftogaz, with Vitrenko, an acting energy minister, on April 28, violating the principles. The reshuffle triggered criticism from the U.S. Department of State.

Ukraine’s gas imports plunged 84% on the year to 2.4 billion cubic meters in January through September, Verlanov said.

“With the gas storages depleted, and with Naftogaz not able to borrow money, and with most routes for gas imports effectively shut down by Gazprom the stage is set for a perfect storm,” Verlanov said.

Naftogaz’s Vitrenko said the company has asked the government for immediate financial support to help increase imports of gas. “There is a certain problem with liquidity,” Vitrenko said, adding that Naftogaz has been simulating different scenarios, including the ‘worst option,’ which would materialize with the launch of Nord Stream 2 gas pipeline from Russia to Germany.

“This is the worst option for Ukraine,” Vitrenko said. “There will be no more gas in Europe, and we will have technical problems and the price of gas will increase in Slovakia, where we buy it.” (tl/ez)




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