Gas distribution networks - civil gas war

Instead of having a usual winter gas war in Russia Ukrainian authorities decided to move the gas war to domestic terrain this year. The idea is that the state wishes to take control over the gas distribution networks previously rented out by private gas distribution companies - oblgases. January 1, 2010 rent agreements become void and the state decided that it does not want to prolong these agreements that easy. Temporary contracts may be signed, but there is no talk about long term contracts so far. Needless to say that the private owners of the distribution companies are getting the value of their companies diminishing to zero dollars. The big fight between the state and owners is ready to begin.

The management of the gas distribution networks is to be accumulated under the roof of Naftogaz - state monopolist in the gas sector. After that the state will have a second wave of privatization in the gas distribution sector giving long-term management contracts to new firms, or may be will condescend to giving these contracts to good old owners of oblgas enterprises, but on entirely new conditions. Naftogazmerezhi, an enterprise that will now manage all state gas distribution networks, is ready to start a long fight or getting all the networks under its control, with litigation if necessary.

Businessmen like Mr. Firtash, oligarch mainly known for owning intermediaries in Ukraine-Russia trade, may be pushed out of the distribution market. Instead Gazprom is likely to enter, perhaps through new chain of intermediaries. Certainly, the result of the civil gas war in Ukraine will be fully determined by who is going to be in power in Ukraine after presidential elections. Should Yulia Tymoshenko win it is most likley that the state will win the control over the distribution networks and Gazprom is likely to enter the market. In case of Viktor Yanukovich unlikely victory status quo in the industry is likely to be preserved.