Ukraine's state gas firm Naftogaz said Friday it paid for Russian gas delivered in November on time, reducing the risk of another cutoff of natural gas to Europe this winter.
Russian gas producer OAO Gazprom (GAZP.RS) said Friday it had received in full the payment for gas delivered to Ukraine's Naftogaz in November.
European officials and consumers of Russian gas watch Ukraine's payments to Gazprom closely, after supplies to Europe through Ukraine were cut off in January for almost three weeks due to a pricing dispute between Moscow and Kiev. The standoff was solved when Ukrainian Prime Minister Yulia Tymoshenko and her Russian counterpart Vladimir Putin negotiated a 10-year supply contract in January.
Gazprom supplies over a quarter of Europe's gas needs, of which around 80% is shipped through Ukraine.
"It is positive that Naftogaz has paid for November. We hope it continues that way," said Gazprom spokesman Sergey Kupriyanov. He declined to comment on the likelihood of a new gas conflict between Gazprom and Naftogaz this winter.
Russian Prime Minister Vladimir Putin warned last month that Ukraine could have trouble paying its gas bills to Moscow. He said Russia would again turn off the taps if it believed Ukraine was siphoning Russian gas from pipelines meant for export to other European customers.
Ukraine, whose fragile economy has suffered severely amid the global economic slowdown, is using a $16.4 billion bailout loan from the International Monetary Fund, or IMF, to pay for its gas.
"We believe the risk of another standoff is very slim," said David Wech, head of research at Vienna-based consultancy JBC Energy.
He admits, however, that the situation could still be complicated by Ukraine's political rivalry ahead of January's presidential elections.
Ukrainian Prime Minister Yulia Tymoshenko is running for president in the January elections, and incumbent Viktor Yushchenko--far behind in the polls--has criticized her natural-gas deals as overly favorable to Moscow.
Ukraine has bought less gas this year than stipulated in the January take-or-pay contract. But Tymoshenko and Putin struck a compromise deal late last month, which allows Ukraine to buy less gas than contracted next year, removing the risk of crippling fines for Kiev. In return, Tymoshenko promised there would be no disruptions in payment of gas or transit of the fuel to Russia's customers in Europe.
"There is a political issue, but all sides have taken a pragmatic approach this year," Wech said. "We believe Europe will make sure that Ukraine pays its bill on time."
Wech noted that Europe stands much better prepared to weather a cutoff than in past years, as demand has weakened while Europe's storage facilities are full.
Under the 10-year supply contract signed in January, Naftogaz must pay its gas bill on a monthly basis no later than seven days after the end of the month. Should Naftogaz fail to pay on time, the agreement says that Naftogaz will have to prepay its monthly gas bills instead.