Naftogaz won't pay $7 b Gazprom bill

Ukrainian oil and gas monopoly Naftogaz Ukrainy says it will not pay a bill for $7 billion Gazprom presented in January for taking less gas than agreed under the gas supply contract between the two concerns, according to the prospectus for an issue of Ukrainian Eurobonds.

"Naftogaz paid for all the gas that was actually delivered in 2012 and believes that Gazprom's bill for importing less gas than contracted is unjustified," the document says.

But the prospectus also says that the take-or-pay provisions of the contract are a risk for Eurobond investors: if Gazprom's claims are upheld, the government might have to bail out Naftogaz, which would put pressure on Ukraine's national budget.

In 2012 the state provided Naftogaz with UAH 3.9 billion in direct assistance (UAH 7.993/$1 on February 11), as well as indirect assistance: UAH 9.8 billion in compensation payments for differences in rates charged for heat in the various regions and a UAH 6 billion increase in charter capital.

Naftogaz has said it won't pay the $7 billion bill, arguing that it notified Gazprom numerous times that it planned to purchase less gas than contracted in 2012.