Russia Hasn't Quite Cracked This Spin-Doctory Thing

It is said that Putin now employs teams of 'political engineers':  but it's early days and their handiwork isn't always up to - how shall we put it - cutting-edge standards.  What follows is an extract from an extraordinarily convenient meeting between Russian PM Dmitry Medvedev and our old friend Gazprom chairman Alexei Miller.  I've omitted the bit where they discuss the weather etc etc but you can read the whole thing on the government.ru website here.

(PS, notwithstanding the occasional piss-take on this site, I am not making this up ...)   

AM:  ... Currently, Gazprom is finalising talks with our Chinese partners, and we are almost ready to sign a 30-year gas supply contract with China. We expect that the contract could be signed already in May. Initial gas supplies to China under the contract amount to 38 billion cubic metres. As you may be aware, this gas comes from Eastern Siberia, but we have made an agreement with our Chinese partners that once the contract for gas supplies from Eastern Siberia is signed, we will immediately start negotiations for gas supplies via the western route, where gas will be coming from gas fields located in Western Siberia, which has traditionally been the resource base for gas supplies to Europe. In the mid-term, we can bring Asian gas supplies to the levels that are comparable with European ones. 

DM: This is a promising market, and in any case we should focus on this part of the world. It's good that you are close to reaching a final agreement. I hope that all these plans will become a reality**, and we’ll obtain a separate and fast-growing market for Gazprom's gas supplies. Now, back to the current affairs. How are our relations with Ukraine? Are there any new problems or is everything as it was? 

AM: Ukraine has not repaid its debt for 2013, plus its debt for current supplies is building up as well. January gas supplies by Gazprom haven’t been paid for yet. Yesterday, our Ukrainian partners told us that they won’t be able to fully cover February gas supplies either. At the end of 2013, we agreed that Gazprom would provide Ukraine with a discount on gas supplies on the condition that Ukraine would repay its debt for 2013 and pay for current supplies in full. Unfortunately, the fact is that the debt for 2013 has not been paid off. 

DM: How much did they pay in all? 

AM: Speaking about the 2013 debt, Ukraine has paid $1.3 billion dollars. 

DM: That is, 50% of the debt? 

AM: Slightly less than that. Ukraine’s total gas debt currently stands at $1.529 billion. Since Ukraine is not meeting its obligations and is not acting according to the agreements that were reached at the signing of the addendum to the contract regarding the discount, Gazprom has decided not to renew the discounted prices beginning next month.

DM: I see. People who don’t pay for the goods they receive must realise that they will suffer consequences, including the cancellation of earlier agreements on preferential terms of delivery. Still, what do you think should be done in order to have this debt repaid? 

AM: Ukraine owes Gazprom a considerable amount of money. Last year’s debt was deferred to Gazprom’s budget for this year, and this money is part of our investment programme. Therefore, the best thing Gazprom could do for Ukraine is to provide it with a loan in the amount of $2-$3 billion for it to repay its debt for 2013 and to pay for current gas supplies. 

DM: It is no secret that 50% of the amount they paid was paid using a sovereign loan that we issued to them. Of course, this is one way to resolve this problem. I will instruct the Finance Ministry to weigh all the possibilities and challenges associated with Ukraine’s currently very low credit rating, and other aspects of Russian-Ukrainian cooperation in this area. In any case, Gazprom should insist on full repayment of debt by its Ukrainian client. This is my first point. Second, the decisions that you are taking to abolish the preferential terms of delivery appear to be perfectly legitimate in these circumstances. 

Wonderful stuff.  And Volodya too has some opinions on it all: and I didn't make this up, either: 

In Moscow, Vladimir Putin said “this is a purely commercial component of Gazprom’s activities. And incidentally, this does not have to do with the events in Ukraine or any other politics. There was an agreement”.

Clear enough ?  Thought so.

NP

_______________________
** PS: long-time readers know my views on this Chinese deal ...