Tymoshenko hospitalized as gas debt repayment deadline looms

By bne IntelliNews February 28, 2008

bne -

Ukrainian Prime Minister Yulia Tymoshenko has reportedly been hospitalized with flu, putting in doubt her ability to carry through President Viktor Yushchenko's order to organise full repayment of the country's debts to Russia's Gazprom before the deadline of 10am on March 3.

"Being a woman of character, she tried to come to work again and was taken to hospital literally from her workplace," Vice PM Oleksandr Turchynov said on Channel 5, reported Ukraine News.

Her hospitalization follows Yushchenko's telegram to Tymoshenko on Wednesday, February 27 stating that she had failed to adhere to the deal he had agreed with Russian President Vladimir Putin earlier in February and demanded she take "urgent and exhaustive measures" to pay the full amount of debt for gas consumed, the Ukrainian leader's press office reported, according to Interfax.

Tymoshenko was due to personally report to Yushchenko on the implementation of his order's execution Thursday, February 28 at 9am, according to Kommersant.

Yushchenko reached an agreement with Putin and Gazprom for Ukrainian gas distributor Natftogaz Ukrainy to repay all its debts, but Tymoshenko has been dragging her feet over implementing the agreement, causing Gazprom to set a deadline of March 3, after which gas supplies to Ukraine would be cut by 25%.

Tymoshenko's hospitalization now makes it almost certain that Ukraine will miss this deadline. Gazprom will either have to back down or go through with a cut, despite the public relations difficulties this will create, given a hostile European press.

Unpaid gas bills

Gazprom spokesman Sergei Kupriyanov told Interfax that Ukraine had still not signed the required document, adding this meant that "undocumented consumption of Russian gas" has continued until now. According to Gazprom, a total of 1.9bn cubic meters of unpaid Russian gas is now stored in Ukraine. "This cannot go on like this. If the problems that have accumulated do not get settled, Gazprom will curtail supplies to Ukrainian consumers by 25% at 10am on March 3 in order to ensure its economic interests in relation to unpaid gas supplies," Kupriyanov was quoted as saying.

Head of Naftogaz press office Valentin Zemlyansky told RBC Daily that his company was paying off the gas debt. "We plan to pay back a further $230m by the end of the week," he noted. He denied any official notification from Gazprom about possible reductions of gas supplies to Ukraine.

Naftogaz claimed February 27 that it had paid all its debt to Gazprom-linked gas supplier UkrGazEnergo for gas the company and its subsidiaries had received in 2006-2007. "Working under an agreement between the Russian and Ukrainian presidents, Naftogaz on February 27 finalized debt payments to UkrGaz-Energo for natural gas consumed in 2006-2007," Naftogaz said in a press release.

However, UkrGazEnergo denied repayment of the debt. "The latest statement by First Deputy Premier Oleksandr Turchynov that NAK Naftogaz Ukrainy had completely repaid its debts to UkrGazEnergo is not only a factual distortion, but also demonstrates low professional standards in the gas industry and finance on the part of one of the government leaders," UkrGazEnergo told Interfax.

Another gas trading intermediary RosUkrEnergo, which is 50% owned by Gazprom and is a co-owner of UkrGazEnergo, also denied the repayment by the Ukrainian side. "Naftogaz Ukrainy's statement about the repayment of debt to UkrGaz-Energo using dividends for 2007 is impermissible and legally unfounded. This illegal position is aimed at dragging out the payment process for all the debt for natural gas consumed in 2007. The remaining debt of Naftogaz Ukrainy to UkrGazEnergo is subject to full and unconditional payment in the shortest possible timeframe," Andrei Knutov, press secretary for RosUkrEnergo told Interfax.

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