January 3, 2009 / 5:46 PM / 11 years ago

FACTBOX: RUE: A mystery player in Russia-Ukraine gas row

(Reuters) - Most of the European countries experiencing lower Russian gas supplies because of Moscow’s dispute with Ukraine, are clients of RosUkrEnergo, an intermediary that has aroused controversy since its creation.

Poland, Romania and Hungary all receive part of their gas supplies from the Swiss-based joint venture, rather than directly from Russian gas giant Gazprom, as does for example Germany.

Since being founded in 2004, RosUkrEnergo (RUE) has also become the exclusive intermediary for Ukraine’s gas imports. Gazprom says it needs the intermediary to manage complicated supplies, which come from different sources.

But Gazprom’s critics, including its minority shareholders, say they still do not understand why RUE, Gazprom’s 50/50 joint venture with two Ukrainian businessmen, is needed as its presence raises questions about the distribution of profits.

Following are the key facts about RosUkrEnergo:

For a guide to all stories on the crisis see [ID:nLV634765]

WHAT IS IT?:

Swiss-based RUE was founded in July 2004. From 2006, Ukraine has been importing mostly Central Asian gas exclusively from RUE, which buys gas from producers in Central Asia and Gazprom and sells it to Ukraine and some European Union consumers.

Ukraine consumes 70-75 billion cubic meters of gas a year and imported 47.9 bcm at a cost of $8.61 billion in 2008.

OWNERSHIP:

Gazprom owns 50 percent and Vienna-based Centragas Holding AG owns the other half.

Ukrainian businessman Dmitry Firtash’s Group DF (GDF) owns a 90 percent stake in Centragas Holding AG. Firtash’s Ukrainian business partner, Ivan Fursin, owns the other 10 percent in Centragas Holding AG. That gives them respectively control of 45 percent and 5 percent in RosUkrEnergo.

CONTROVERSY:

Prime Minister Yulia Tymoshenko, battling President Viktor Yushchenko, wants RosUkrEnergo abolished. She has repeatedly said that RosUkrEnergo is “a corrupt intermediary” which is protected by top politicians.

RUE has denied allegations that top Ukrainian or Russian politicians have commercial interests or benefit from its activities.

Though Yushchenko has only rarely commented on the intermediary, he has recently given signals that he would not oppose its abolition.

In October 2008, Tymoshenko and Russian Prime Minister Vladimir Putin signed a memorandum that stipulated Ukraine would pay a market price within three years after gradual rises and that supply intermediaries like RosUkrEnergo would be scrapped.

The International Energy Agency (IEA) has called for greater transparency in European gas transit and sales.

“Where intermediary agencies are involved, the gas flow and pricing arrangements should be much more transparent, including transit costs,” the IEA said on January 1.

Global Witness, a nongovernmental organization against corruption involving natural resources, questioned in 2006 why RosUkrEnergo is needed at all: “What service does RosUkrEnergo provide to the gas trade that cannot be provided by (Ukrainian state energy firm) Naftogaz,” it said.

FINANCES

According to a report on RUE’s www.rosukrenergo.ch website, the company sold $9.9 billion worth of gas in 2007 and had a net income of $795.2 million. There were no financial statements on the website for full year 2008.

GAS DEBTS:

Naftogaz says it has paid $1.5 billion to RUE. Gazprom says it expects to see that money on January 11 and adds that Ukraine would still owe over $600 million to RUE.

The final structure of that $600 million debt has never been fully disclosed, but it includes mostly fines for late payment and some older debts.

Naftogaz Chief Oleh Dubyna told reporters on January 3 that Ukraine would accept a court’s decision and pay if ordered to.

RESERVES:

Naftogaz said in late 2008 that RUE has 11 bcm of gas stockpiled in Ukraine.

Gazprom Deputy CEO Alexander Medvedev told Reuters on Jan 3 that Ukraine is preventing RUE from taking stockpiled gas to meet its European export commitments. [ID:nL3487743]

RUE said on January 3 it had filed lawsuits against Naftogaz in Stockholm to recover $614 million and for using RUE’s gas in reservoirs inside Ukraine without its permission.

Reporting by Pavel Polityuk, Sabina Zawadzki and Guy Faulconbridge in Kiev and Dmitry Zhdannikov, editing by Tony Austin

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