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EurasiaNet.org provides information and analysis about political, economic, environmental and social developments in the countries of Central Asia and the Caucasus, as well as in…

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Gazprom Threatens To Cut Off Gas Supply To Kyrgyzstan

When Russian gas giant Gazprom bought up Kyrgyzstan’s natural gas distribution system in 2014, some grumbled about loss of sovereignty, while others were relieved the purchase meant gas cut-offs could become a thing of the past.

So there will be some dismay if Gazprom-Kyrgyzstan, as the local affiliate is called, follows through on threats to suspend gas supplies in the country.

News website Zanoza.kg on February 18 reported that Olga Lavrova, Gazprom-Kyrgyzstan’s deputy general director for finances, said the danger of a cut-off has been precipitated by a dispute over debt with German-owned plate glass manufacturer Interglass.

“Because of the debts owed by Interglass, the whole of Kyrgyzstan could end up without gas,” Lavrova was quoted as saying.

Gazprom-Kyrgyzstan has since its incorporation been engaged in an uphill battle to force its customers to pay for the fuel that they use. Interglass is by far the largest delinquent debtor with 698 million som in unpaid bills and another 419 million som in interest outstanding on those debts, according to the gas supplier. As of February 1, that puts Interglass’ total debt to Gazprom at a whopping $15 million at the current rate. Related: Why Is Well Decommissioning So Slow In Canada?

Lavrova said Interglass continues to use 1.2 million som worth of gas daily, while only usually paying 2-3 million som per month.

Failure by the glass producer to pay its bills has caused Gazprom-Kyrgyzstan in turn to accumulate debts to its suppliers of $12.5 million, Lavrova was quoted as saying.

“Gazprom-Kyrgyzstan has not paid for its supplies of natural gas in November 2015. The supplier has allowed for a delay in payment, and is not charging interest, but this situation cannot go on indefinitely,” Lavrova said.

But if the supplier is not paid, flows of gas will come to a halt, she said.

Gazprom-Kyrgyzstan says it has initiated bankruptcy proceedings against Interglass in an attempt to claw back some cash through a seizure of assets, but to no avail. Interglass apparently has no money in any of its bank accounts inside Kyrgyzstan and the company’s assets are being held as collateral by a third party. Related: Oil Rally Stalls After Iran Declines to Commit to Freeze

Online news agency 24.kg quoted Saltanat Djumagulova, an adviser to Gazprom-Kyrgyzstan’s general director, as saying that gas supplies to Interglass could be suspended within the coming two weeks unless debts are cleared.

“It turns out that we cannot secure the money owed to us by any means. So we have decided to cut off the company in the near future. We want to stop the further accumulation of our debts and see no other way of settling the issue,” Djumagulova said.

Such disputes are a far cry from the optimism that accompanied Gazprom’s entry into Kyrgyzstan. Back then, Gazprom was promising to invest 20 billion rubles ($560 million at the time) into upgrading the country’s aging gas distribution network and to extend the coverage of gas supply from 22 percent of the population to 66 percent.

As part of the symbolic $1 purchase of Kyrgyzstan’s gas company, then called Kyrgyzgaz, Gazprom also agreed to saddle itself with around $40 million worth of debt.

In fact, Gazprom-Kyrgyzstan in January finally paid $41.3 million owed to Kazakh supplier KazTransGaz for deliveries and “unauthorized gas bleeds” between 2004 and 2014. Related: Activist Investors Crushed By Oil Crash

Should Gazprom-Kyrgyzstan decide it can no longer supply gas, it could further strain Russia’s admittedly high standing among the population.

In January, Kyrgyzstan’s parliament voted to cancel a deal with Russian companies to build two major hydropower facilities after concluding that the projects were going nowhere.

Conscious of the importance of preserving friendly ties with Moscow, on which Kyrgyzstan remains heavily dependent, President Almazbek Atambayev adopted a strikingly forgiving tone ahead of the vote in parliament.

“In the current situation, when the economy of Russia is not on the rise, let’s just say, and the trend for oil prices is only going downward, we see that these agreements… well, for objective reasons they cannot be fulfilled by the Russian side,” he said.

UPDATE: Gazprom-Kyrgyzstan quickly rowed back from its official’s statements later on February 18 by assuring the public that natural gas supplies in Kyrgyzstan would remain “stable and uninterrupted.”

Still, the Russian-owned company injected a hint of warning into its reassurances, which appear to have been issued in reaction to a flurry of media reports about Lavrova’s possibly ill-judged remarks.

“The inability of Interglass to settle its accumulated debts negatively impacts Gazprom-Kyrgyzstan’s ability to fulfill its duties to pay for the gas that is delivered to this country,” the company said in a statement.

By Eurasianet

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