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Turkmenistan: Ukraine Still In Arrears On Gas Payments

Ukraine has fallen behind in its payments to Turkmenistan for gas supplies for the third time since 1994. On two earlier occasions, Ashgabat stopped supplying Kyiv, but it has few other choices for customers.

Boston, 4 June 2002 (RFE/RL) -- Turkmenistan's latest trouble in collecting payment for gas sales to Ukraine may pose serious problems for both countries. Last week, Turkmenistan President Saparmurat Niyazov called President Leonid Kuchma seeking $46 million for Ukraine's current gas bills, Turkmen television said in a report monitored by the BBC. The debt is owed by the national oil-and-gas company, Naftogaz Ukrainy.

Niyazov also complained about the slow performance of Ukrainian contractors who have been trading services on projects in Turkmenistan under a barter deal that requires only half of Kyiv's payments in cash. Kuchma promised "he would do his best" to deal with the problems, Interfax reported, quoting Niyazov's press service.

But it is not clear that Kuchma has fully acknowledged Kyiv's obligations, or that a solution is in the works. During a visit to Ashgabat at the end of April, Kuchma told a joint press conference that Ukraine still owed Turkmenistan for gas delivered in the 1990s.

But he said: "Concerning the current state of payments, I don't think we...have any problem there. We are making payments for every bit of gas supplies."

Judging by the amount of current debt claimed by Niyazov, Ukraine may have failed to pay for more than 2 billion cubic meters of gas delivered this year. Turkmenistan is charging Ukraine $42 per 1,000 cubic meters at the Turkmen border. But under the half-cash deal, Niyazov seems to be counting Ukraine's bills at the rate of $21 per 1,000 cubic meters, while treating its slow services as an additional problem.

Kuchma's accounting for Ukraine's old debts to Turkmenistan is also murky. Speaking at the joint press conference, Kuchma said, "They stand at some $65 million for the period prior to 1990 and 1999." But past reports and a more recent one by Ukraine's UNIAN news agency put the debt for gas supplied in 1993 and 1994 at $281.7 million.

Various figures have also been published for gas debt that Ukraine incurred in the first quarter of 1999, ranging from $107 million to $200 million. It is not clear how much of that amount Turkmenistan considers paid. At one time, Turkmenistan also sought to impose $82 million in penalties for the 1993-94 debts, according to the Trend news agency. Taken all together, Ukraine could owe Turkmenistan more than $600 million for gas.

But despite bad experience, Niyazov has seemed reluctant to cite the cumulative figures, preferring to start over again with Ukraine and publicize only the smaller amount of the debt for this year. In October 2000, Niyazov was persuaded to restart gas deliveries to Kyiv, despite two earlier cutoffs for arrears, on the condition that it would make monthly payments for supplies in advance. That arrangement appears to have slipped again into arrears.

There also appear to be big discrepancies between the amount of gas that Turkmenistan says it shipped to Ukraine and how much Kyiv says it received. On 27 May, Turkmen officials claimed to have sent nearly 13 billion cubic meters of gas to Ukraine so far this year.

But on 22 May, the Ukrainian Fuel and Energy Ministry told Russia's RBC News that Turkmenistan exported only 6.9 billion cubic meters to Ukraine in the first four months of the year.

The public disclosure of payment problems will do little for either country. Turkmenistan's finances have long been suspect because of its reliance on Ukraine as its major market. Ukraine's creditworthiness can hardly be helped by falling behind on its bills.

Niyazov's choice to keep doing business with Ukraine reflects the fact that he has few other choices. After two years of talks, Turkmenistan seems no closer to signing a long-term gas supply deal with Russia, although Gazprom chief executive Aleksei Miller tried again in April, Platts news service reported.

Miller visited Ashgabat with President Vladimir Putin for a Caspian Sea summit, but he was rebuffed with familiar complaints. Niyazov accused Gazprom of selling Turkmen gas in Europe at more than twice the price of fuel at the Kazakh border, ignoring the cost of transport.

Putin has been trying to get Turkmenistan to join in a Central Asian gas alliance. But the Russian business newspaper "Vedomosti" quoted Niyazov as saying, "As long as Russia does not allow Turkmenistan into the European market, there will be no point for Ashgabat to participate in any alliance."

Instead of allowing Turkmenistan to make deals in Europe using Russian pipelines, Moscow has agreed to carry Turkmen gas only as far as Ukraine. Russia has profited from the trade while reducing its own risk of supplying Ukraine.

Niyazov has only been able to seek repayment and hope for the best. Last year, he signed an agreement to supply Kyiv with 250 billion cubic meters of gas between now and 2006. But last month, Interfax quoted sources in Ashgabat as saying Ukraine may lower its purchases from Turkmenistan this year.

Niyazov recently invited Ukraine to take part in more projects, including the construction of a gas pipeline through Afghanistan, which still lacks a funding source. It seems that he can only stay engaged with Kyiv and hope that it will make good on its debts.