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Author Topic: Gas War Ends & Turkmenistan has its say!!!  (Read 3381 times)

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Offline Rvrwind

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Gas War Ends & Turkmenistan has its say!!!
« on: January 16, 2006, 04:00:18 AM »
Vol#1

<tit>THE GAS WAR BETWEEN RUSSIA AND UKRAINE IS OVER
Russian gas will not go to Ukraine although Gazprom and Naftogaz Ukrainy have reached an agreement on terms for gas transit and supplies. Details of the agreement show that gas supplies from Central Asia will be sufficient for the needs of Ukraine and Gazprom's gas worth $230 per 1,000 cubic meters will most likely go to European consumers. Analysts presume that Swiss intermediary RosUkrEnergo will benefit from this complicated scheme most of all.

Ukraine consumes 76 billion cubic meters of gas a year including 20 billion cubic meters produced on its own territory. In 2005, Gazprom transported 110 billion cubic meters of gas via Ukraine at a price of $1.09 for transportation of 1,000 cubic meters 100 kilometers. Ukraine also received 23 billion cubic meters of gas from Gazprom as payment for transit at a price of $50 per 1,000 cubic meters. Ukraine buys the rest of gas from Turkmenistan. The Swiss-domiciled company RosUkrEnergo established in 2004, by Gazprombank (50%) and Raiffeisen Investment (50%), supplies Turkmen gas to Ukraine. For its services, RosUkrEnergo receives 37.5% of transported gas. In 2005, Ukraine bought 34 billion cubic meters of gas from Turkmenistan and RosUkrEnergo received 12.7 billion cubic meters from this quantity.

The gas war between Ukraine and Russia began after Gazprom decided to raise gas price almost fivefold from $50 to $230 per 1,000 cubic meters starting from 2006, and to give up barter payment for gas transit via Ukrainian territory. However, Ukraine did not agree to buy gas at a price higher than $70-80 per 1,000 cubic meters and on January 1, 2006, Gazprom stopped gas supplies to this country. Ukraine started taking transit gas immediately but already on January 4, the conflict was settled. Ukrainian President Victor Yushchenko announced that Ukraine agreed to buy gas on the border with Russia at $95 per 1,000 cubic meters and Gazprom agreed to increase the transit payment from $1.09 to $1.60 for transportation of 1,000 cubic meters 100 kilometers. CEO of Gazprom, Alexei Miller, added that Russia would supply its own gas to Ukraine at $230 per 1,000 cubic meters through Swiss RosUkrEnergo.

On January 10, Senior Deputy CEO of Naftogaz Ukrainy, Andrei Lopushansky, confessed that expensive gas of Gazprom would not come to Ukraine. He explained, "From the very start the gas agreement with Gazprom implied this. Taking into account the locally produced 20 billion cubic meters a year, 56 billion cubic meters of Central Asian gas will be enough for Ukraine and it will buy this gas from RosUkrEnergo at $95".

In turns out that all supplies of Gazexport from Central Asia are reassigned to this company and as a result the Swiss company will be able to manage up to 56 billion cubic meters of gas passing through the territory of Russia. This is implied by the text of the agreement of Gazprom, RosUkrEnergo and Naftogaz Ukraine announced on January 5, by former Prime Minister of Ukraine Yulia Timoshenko. At any rate, besides the Central Asian gas, RosUkrEnergo also undertook purchase of 17 billion cubic meters of gas from Gazprom at a price of $230 per 1,000 cubic meters and supply of gas to Ukraine in the first half of 2006, at $95 per 1,000 cubic meters. Representatives of Gazprom did not deny authenticity of the document and Deputy CEO of Gazprom, Alexander Medvedev, confirmed only that RosUkrEnergo would receive the aforementioned quantity of gas. Wolfgang Putschek, member of the Board of Directors of Raiffeisen Investment promises, "Gazprom will receive its $3.9 billion for 17 billion cubic meters anyway."

Analyst of UFG, Pavel Kushnir, concludes that this information shows that the major part of Gazprom's gas worth $230 per 1,000 cubic meters will evade Ukraine. Kushnir adds, "Gazprom simply saves its face speaking about the price of $230 for Ukraine although in reality this gas will be bought by Europeans through the intermediary. However, RosUkrEnergo will make much money on trading operations with Central Asian gas." According to CEO of Naftogaz Ukrainy, Alexei Ivchenko, Turkmen gas will cost $50-60 per 1,000 cubic meters. Kushnir has calculated that if the price of gas from Uzbekistan and Kazakhstan is in the same brackets the gross profit of RosUkrEnergo from operations with Central Asian gas in 2006, it may amount to about $1.6 billion. Kushnir comments, "Gazprom has actually given all volumes of Central Asian gas to Ukraine, only dividends from this will be received by RosUkrEnergo that will manage gas supplies from the region." Dmitry Lukashov from Aton agrees, "Private beneficiaries of the Swiss company will benefit very much because with them Gazprom will share a half of revenues of RosUkrEnergo (about $800 million a year)."

Representatives of Gazprom consider the agreement with Ukraine successful. A spokesperson for Gazprom says, "For us it was fundamentally important to break connection between gas transit via Ukraine and supplies to Ukrainian market." The spokesperson added that Gazprom distanced itself from the price risks connected with supplies of Central Asian gas.
<ref>Vedomosti, January 11, 2006

<tit>TURKMENISTAN MAY INCREASE THE PRICE OF ITS GAS
Despite the signed agreement, the problem of gas price for Ukraine cannot be considered finally solved. President of Turkmenistan, Saparmurat Niyazov, already prepared a surprise. At a meeting with the Russian president, Niyazov is going to demand increase of the price from $65 to $85 per 1,000 cubic meters. This will automatically lead to growth in price of gas for Ukraine because it is the Turkmen gas that is intended for this country.

In 2006, Ukraine will consume 76 billion cubic meters of gas including 20 billion cubic meters of domestically produced gas. On January 4, managers of Gazprom and Naftogaz Ukrainy signed an agreement under which Gazprom would pay $1.60 for transit of 1,000 cubic meters of gas 100 kilometers to Ukraine and Ukraine would buy gas at a price of $95 per 1,000 cubic meters on the border with Russia in the first half of 2006. However, the supplier of gas will not be the Russian gas monopoly but Swiss intermediary RosUkrEnergo. To RosUkrEnergo Gazexport and Naftogaz Ukrainy will reassign their contracts for 56 billion cubic meters of gas from Central Asia for 2006. In 2006, RosUkrEnergo will also buy 17 billion cubic meters of gas from Gazprom at a price of $230 per 1,000 cubic meters. Gazprombank (50%) and Raiffeisen Investment (50%) established RosUkrEnergo in 2003.

Having met on January 11, in Astana presidents of Russia and Ukraine, Vladimir Putin and Victor Yushchenko, unanimously praised the "gas agreement" signed by Gazprom and Naftogaz Ukrainy on January 4. However, the idyll may be broken after the meeting of President of Turkmenistan Saparmurat Niyazov with President of Russia Vladimir Putin scheduled for January 22-23. According to two sources close to Gazprom, Niyazov will insist on raising the price of Turkmen gas to $85. A spokesperson for the Embassy of Turkmenistan in Moscow reported, "Taking into account world prices of energy resources we believe that it is just to correct the gas price to $75-85 per 1,000 cubic meters." A spokesperson for Gazprom did not comment on this information but said that the company contracted 30 billion cubic meters of gas at a price of $65 per 1,000 cubic meters in Turkmenistan for 2006. It was impossible to obtain comments from Turkmenneftegaz. Officials of Turkmen embassy provide different information, "In the first quarter of 2006, Turkmenistan may sell to Gazexport a half of contracted quantities of gas at a price of $65 per 1,000 cubic meters and it has been proposed to reach a separate agreement on the price of the remaining 15 billion cubic meters."

Meanwhile, this very gas was intended for supplies to Ukraine via RosUkrEnergo. CEO of Naftogaz Ukrainy, Alexei Ivchenko announced, "Raising the price for Gazprom is a matter of its relations with Turkmenistan." Ivchenko explains that under the agreement of January 4, it is impossible to change the price unilaterally. He concludes, "Our stance is $95 on the border of Ukraine with Russia and we will not buy at a different price."

Analyst Pavel Kushnir, of UFG, remarks that if Turkmenistan manages to raise the price of its gas to $85 per 1,000 cubic meters and the price for Ukraine remains on a level of $95 supplies to Ukraine will become unprofitable. In this case, the costs of Turkmen gas taking into account transportation will approach $100 per 1,000 cubic meters on the border with Ukraine.

Along with this, Gazprom did not reach an agreement on the purchase price of Kazakh and Uzbek gas yet. This gas will be supplied to Ukraine via RosUkrEnergo too. Analysts predict that depending on these prices the intermediary will either receive "minimum" profit or will operate at a loss. According to Dmitry Lukashov from Aton, if the price of Turkmen gas is $85 per 1,000 cubic meters RosUkrEnergo will be able to avoid losses only increasing the price for Ukraine to $105-110 per 1,000 cubic meters.

Formerly, Deputy CEO of Gazprom, Alexander Medvedev, admitted that in the second quarter of 2006, the price of gas for Ukraine might grow. A government official presumes that in the first quarter, RosUkrEnergo will buy 15 billion cubic meters of Turkmen gas at $65 from Gazexport and in the second quarter, it will buy 11 billion cubic meters at $50-60 from Naftogaz Ukrainy and starting from the third quarter Turkmenistan can quite increase the price of its gas to $75-85. In this case, it will be necessary to increase the price of gas supplied to Ukraine. The official adds, "The relevant terms will be outlined in contracts of Gazprom and Naftogaz Ukrainy regarding formation of the goods balance of RosUkrEnergo." On January 12, Ukrainian Fuel and Energy Minister promised that these documents would be signed by January 25.
<ref>Vedomosti, January 13, 2006

<tit>OUTFLOW OF PRIVATE CAPITAL CHANGED FOR INFLOW FOR THE FIRST TIME IN TEN YEARS
In 2005, outflow of private capital from Russia changed for inflow for the first time. The Central Bank published this information. According to the Central Bank, in 2005 net capital inflow amounted to $0.3 billion. Experts explain the trend by the economic situation favorable for business, as well as capital amnesty announced by the state. Along with this, nobody issues equally favorable forecasts for 2006 yet.

In the last decade, capital outflow was morer than capital inflow annually. Thus, in 2000 net capital outflow amounted to $24.8 billion, in 2001 it amounted to $15 billion, in 2002 it amounted to $8.1 billion, in 2003 it decreased to $1.9 billion, in 2004 it grew again to $8 billion and in 2005, it fell to $0.3 billion.

Along with this, in 2005, net capital inflow of the banking sector amounted to $5.3 billion and net capital outflow in the sector of non-financial enterprises and households amounted to $4.9 billion.

Yevgeny Yasin, senior researcher of the Higher School of Economics, comments, "In 2003, capital outflow practically stopped but in 2004, the outflow restarted because of the YUKOS affair. The positive trend began in 2005, because the state stopped using harsh sanctions against business. Revival occurred in the economy. Monetary demand grew noticeable, the number of issued credits grew dramatically and Russia received three positive ratings."

According to Vice President of Aton, Vadim Soskov, significant inflow of foreign capital to the Russian stock market was registered in 2005. Soskov added, "Inflow of the offshore Russian capital was going on simultaneously. This happened because the state as though announced a psychological amnesty for those willing to repatriate money to the country."

According to statistical data of the Central Bank, throughout 2005, the ratio of inflow and outflow of capital was changing permanently. Thus, in the first quarter of 2005, there was net capital inflow of $0.4 billion, in the second quarter it amounted to $4.3 billion and in the third quarter it amounted to $8.1 billion and there was net outflow of $3.9 billion in the fourth quarter.

Experts say that capital outflow registered in the fourth quarter shows that positive trend of net capital inflow may be confined to 2005. Yasin warns, "There are no guarantees that capital outflow will continue in 2006, because it is not known how the authorities will behave towards business." Experts also explain the breakthrough of 2005, saying that large borrowings of state-run companies have reduced the sum of net capital outflow tremendously.
<ref>Biznes, January 13, 2006

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