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Russia brings back Ukraine gas middleman - source

The company logo of Russian natural gas producer Gazprom is seen on an advertisement in front of the White House in Moscow February 8, 2013. REUTERS/Maxim Shemetov

By Vladimir Soldatkin

MOSCOW (Reuters) - Gazprom (MCX:GAZP) has agreed to supply gas at a discount to a Ukrainian tycoon, whose past role in gas deals ended after a price row in 2009, a company source said on Wednesday, as concerns mount over Ukraine's ability to foot its import bill.

Dmytro Firtash's Ostchem holding will purchase 5 billion cubic metres (bcm) of gas to put into underground storage, at a 30-36 percent discount to the price Ukraine pays for Russian gas, the source added, confirming Russian newspaper reports.

Gazprom CEO Alexei Miller has said the transit of Russian gas exports to Europe is at risk again due to low levels of gas in underground storage in Ukraine ahead of winter, when cold weather pushes up demand.

"This deal with Ostchem will make it possible to increase the level of gas storage in Ukraine and provide for safe passage of Russian gas to Europe," the source said.

Ostchem declined to comment. Gazprom had no official comment.

With the extra volumes purchased by Firtash, Ukraine will hold 19 bcm of gas in storage, "the level required to ensure trouble-free gas deliveries to Europe in the 2013-14 winter season," Alfa Bank said in a note.

Gazprom meets a quarter of Europe's gas needs, and more than half of Russia's gas exports to the European Union flows across Ukraine. The remainder traverses Belarus or goes via the Nord Stream pipeline under the Baltic Sea to Germany.

The issue of Russian gas exports to Europe has come to the fore this week with reports that a London court froze $21.7 million out of a $75.8 million eurobond coupon payment by Ukraine's state oil and gas company Naftogaz.

Ukraine has $10.8 billion of foreign currency debt maturing through 2014. Its foreign currency reserves are just over $20 billion, but they are likely to keep falling, particularly if local Ukrainians try to buy foreign currency.

A row between Moscow and Kiev in January 2009 over gas prices and debts led to several weeks of supply cuts that hit eastern European countries tied to Gazprom's export pipeline network particularly hard.

After the row, both countries signed a 10-year supply deal and eliminated Firtash's company, RosUkrEnergo, from the role of intermediary between Gazprom and Naftogaz (NAFTO.UL).

Last year, Ukraine, the second-largest buyer of Russian gas after Germany, bought 32.9 bcm of gas from Gazprom.


Russian President Vladimir Putin said on Wednesday Ukraine would get the volumes for underground storage at a discount, paying $260 per 1,000 cubic metres (tcm). He did not elaborate.

Naftogaz now pays around $400 per tcm for Russian gas, more than Gazprom's other European buyers.

Putin also said Russia will lend $750 million to Ukraine. It was not immediately clear who will get the funds.

He commented on the Ukraine gas deal just a month before Kiev is set to sign a free trade pact with the European Union, a plan that has irked the Kremlin which is building its own post-Soviet trade bloc.

Russia fears its market could be flooded as a result by competitive EU goods entering Ukraine free of import duties and being re-exported across the long border with Russia.

If Kiev signs the EU trade deal, joining the Russia-led customs union would be out of the question, senior Russian officials say.

(Additional reporting by Alexei Anishchuk and Pavel Polityuk; editing by Douglas Busvine and James Jukwey)