Ukraine says it’s paying its gas debt, Russia claims too slowly

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Naftogaz of Ukraine (NAFTO), the state monopoly on gas production and transit, has begun repayment of its debt for gas supplied from Gazprom in August, Ukraine’s Energy Minister Eduard Stavytskiy stated on November 5. He said the payments will be enough to close the issue, without clarifying when it will be closed and how much Naftogaz is going to pay. A week before, Gazprom claimed Ukraine owes USD 882 mln for August gas.

Later on November 5, Gazprom official Sergei Kupriyanov clarified via the Interfax news agency that Naftogaz paid USD 50 mln on October 30 and USD 6–9 mln in each of the following business days, thus having repaid less than 10% of the total bill (USD 882 mln). He added that full repayment will take too long at such tempos. big1

Naftogaz Deputy CEO Vadym Chuprun confirmed on November 6 the numbers provided by Kupriyanov, informing Interfax that the remaining debt is USD 806 mln as of today. Nazftogaz is directing literally all its available funds to settle the debt, he said.

Concorde Capital: Alexander Paraschiy: The good news is that Naftogaz is demonstrating to Gazprom that it’s doing its best to resolve the conflict, potentially decreasing the chance that Gazprom will demand a shift to prepayment for Russian gas (recall, currently Ukraine pays for Russian gas during the first week of the following month and breaching that schedule allows Gazprom to demand prepayments). The bad news is that tomorrow is the deadline by which Naftogaz has to pay the October bill. So far, we do not have any information neither on the bill’s amount nor on Naftogaz’s ability to pay it.

More bad news is that the extra gas repayment only creates additional demand for dollars during this same critical period in which Ukraine has to cover an IMF debt (about USD 1.6 bln in the previous week, this week and next week). This situation seems to have already affected the price of the local currency: the U.S. dollar this week broke the resistance level of 8.2 UAH/USD for the first time this year. That by itself can worsen hryvnia expectations and exacerbate demand for U.S. dollars from households to further pressure the hryvnia.

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