Minority shareholders “Gazprom” have become hostages to the policy

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Commercial Director of “Naftogaz” Yuriy Vitrienko reported that Ukraine had to buy European gas to four times more expensive, than at “Gazprom”. According to him, to make up the difference in the cost of fuel should the Russian company.
On Friday “Gazprom” announced the severance of contracts with “Naftogaz”. The decision was taken after the verdict of the Stockholm court of arbitration in the proceedings between the two companies. “Gazprom” and “Naftogaz of Ukraine” has initiated proceedings in 2014. The Stockholm arbitration court has obliged “Gazprom” to pay “Naftogaz” of $4.6 billion for failure to supply agreed in the contract volumes of gas for transit. Taking into account the previous decisions of arbitration, according to which “Naftogaz” is obliged to pay Gazprom $2 million for deliveries, the Russian side to the Ukrainian $2.56 billion In “Gazprom” have declared that do not agree with the court’s decision and intend to protect your rights.
All strategic decisions in “Gazprom” have always taken the Kremlin. And the current situation should be viewed primarily in the context of the overall confrontation between Russia and the West. It is hardly surprising that after the tough talk, Vladimir Putin last week in Moscow he went to the tightening of the course. Gazprom is partly dependent on Ukrainian gas transit. To get rid of this dependence, he will be able only after the launch of the “Turkish stream” and “Nord stream-2”. Whether building new pipelines is difficult to say, in the history of the policy remains stronger economy. To the normalization of relations between Moscow and Kiev very far.
We only recall that at the end of 2013, Moscow and Kiev agreed on gas supplies on preferential terms. Then the conditions for Ukraine was comparable to the conditions for Belarus. Plus Russia agreed to give Ukraine a loan of $15 billion. In reality, the loan amount was only $3 billion, which Ukraine has in fact defaulted.
While we can only speculate how it will continue to happen. Spring is near, and soon the gas issue will become for Kiev less acute. Early termination of the contracts is a loss of export revenues and revenues of the Russian budget. Gazprom, of course, try to minimize their losses due to the alternative export routes. The budget of the Russian Federation and Gazprom itself the loss will survive. Default on the debt to “Gazprom” is not threatened. However, the corporate credit rating could be lowered. Dividends to shareholders may also be significantly reduced. May also be frozen most capital-intensive investment projects. Reduction of investment programs looks logical under the circumstances.
Minority shareholders of “Gazprom” in the current situation become hostages of the policy. The market will no doubt play bad and very bad news. Gazprom, of course, very, very cheap. Ten years ago, for the shares of the gas holding, which also includes oil and electricity, the exchange gave $10-13., now of $2.4.
But who said that “Gazprom” can not be even cheaper. Profits from Rosneft and LUKOIL by far less, but the risks of an investment in these securities is not comparable with the risks of shares of “Gazprom”.
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Alexander Razuvayev,
The Director of analytical Department,
Alpari