You're reading: Duma passes bill authorizing Gazprom to conduct mutual debt offsets with Naftogaz

MOSCOW - The State Duma approved in a third and final reading on Oct. 21 a bill that authorizes Gazprom to conduct mutual debt offsets with Naftogaz Ukrainy.

The bill amends Article 19 of the law on currency regulation and currency control (“Repatriation of Foreign Currency and Currency of the Russian Federation by Residents”) to include a point expanding the list of cases when residents have the right not to credit foreign currency or rubles to their accounts at authorized banks. This will not need to be done when claims on obligations of nonresidents to pay for delivery of natural gas in gas form are used to offset the gas exporters’ obligations to pay for gas transit services through foreign countries.

This change, among other things, allows Gazprom’s obligations on the contract for transit shipments of natural gas through Ukraine to offset Naftogaz Ukrainy’s obligations to pay its accumulated debt.

Gazprom had raised the issue of cross-cancellation in a letter on Aug. 20, soon after which Russian President Vladimir Putin tasked the government with considering this possibility. The Finance Ministry, Economic Development Ministry, Federal Service of Financial and Budgetary Oversight (Rosfinnadzor) and the Central Bank reviewed Gazprom’s letters and said it was beneficial to amend the law on currency regulation and currency control. Rosfinnadzor said the amendments were justified due to the difficult situation in Ukraine and the need to ensure the protection of national interests and the interests of Russian companies when conducting foreign economic activities.