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Gazprom OAO (ADR) (OTCMKTS:OGZPY) To Exempt Gas Supplies

Kremlin-controlled Gazprom OAO (ADR) (OTCMKTS:OGZPY) said that it intend to exempt gas supplies in the rebellious areas. The exemption will be possible with its contract with Ukrainian Naftogaz. It will be done before Kiev utilizes gas volumes that the company has already paid for.

The problem

The issue over gas supplies heated up last week when Gazprom announced that it commenced direct gas supplies to the areas in eastern Ukraine. These are rebellious regions held by pro-Moscow rebels. The company said that it would be Naftogaz who would pay for these gas supplies in rebellious regions. However, on Thursday, Sergei Kupriyanov, a Spokesman for Gazprom said that the company is prepared at the moment to bar gas supplies to Donbass as per discussions with Ukraine. He also said that Ukraine has paid for gas supplies for this week in advance.

The gas issues

Ukrainian State Energy Company Naftogaz and Gazprom have alleged each other of not following the rules laid in the agreement of gas supplies. Kiev stated that it failed to control gas supplies to East Ukraine. It has previously alleged Gazprom of minimizing gas flows to Ukraine. Dmitry Peskov, the Spokesman for Kremlin, was asked that would Russia offer gas supplies to East Ukraine for no cost. He answered that he cannot comment on supplies at this moment, but agreed on paying prompt attention to existing gas issues, if required.

Payment problem

Earlier in this week, President Vladimir Putin stated that Russia would stop gas flows to Ukraine in absence of advance payment. If that happens, it will disrupt deliveries to Europe for the fourth time in a decade. Gazprom stated that Ukraine has just 206 million cubic meters gas left for which payment has been received. With the current situation of gas flows, prepayments will account for gas supplies of just this week.

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