You're reading: Ukraine contacts Spanish firm after $1 billion gas deal fiasco

Ukraine was on Thursday in contact with a Spanish firm after the signing of a $1.1 billion gas terminal deal ended in fiasco, acutely embarrassing the government.

The former Soviet republic has admitted it signed a contract
on Monday for constructing a liquiefied natural gas (LNG)
terminal on the Black Sea coast with an unauthorised man,
mistakenly believing he was acting for Gas Natural Fenosa
.

The ink was scarcely dry on the agreement, which was signed
in front of Prime Minister Mykola Azarov and the energy
minister, when Barcelona-based Gas Natural publicly denied the
man was its representative and said there was no contract.

The Ukrainian state investment agency which spearheaded the
deal has identified the man as Jordi Sarda Bonvehi. An agency
official said he had been a middleman in the talks with Gas
Natural.

With speculation rife in Ukraine that heads will roll over
the fiasco, the state investment agency issued a statement
saying it was contacting Barcelona-based Gas Natural to find out
whether it was still committed to the LNG terminal project.

The project itself forms part of efforts by Ukraine to cut
dependence on expensive pipeline gas from Russia.

A statement from the agency on Thursday said it had asked
Natural Gas for a meeting “to settle the question of the Spanish
company’s participation in the LNG terminal project”.

Gas Natural denied on Wednesday it had given any mandate for
a deal in Ukraine. The company has a presence in 25 countries,
but does not have any business in Ukraine.

Reuters in Madrid spoke several times by telephone
on Wednesday and Thursday with an individual who said he was
Jordi Sarda Bonvehi. He said he was in Barcelona and he spoke in
Catalan and in Spanish.

He declined to answer questions by telephone, but said that
at some point he would make a statement in person.

Gas Natural says that for a deal of this size, its chairman
would have attended to sign it.

AWKWARD TIME

The affair comes at an awkward moment for Ukraine’s prime
minister Azarov and handed ammunition to the opposition which
has been re-energised after a parliamentary election a month
ago.

Though Azarov has made it clear he would prefer to stay on
as prime minister rather than opt for a deputy’s seat in
parliament, that decision finally lies with President Viktor
Yanukovich who was out of the country when the LNG deal was
signed.

With the opening ceremony of the new parliament just two
weeks off, an opposition deputy from the party of jailed
ex-prime minister Yulia Tymoshenko said Yanukovich, Azarov and
the head of the state investment agency should be held to
account for a “crooked deal” which could cause Ukraine huge
economic losses.

“This issue will be the first topic to be checked by the new
parliament and the opposition will demand punishment of the
criminals in power”, said Serhiy Sobolev in a statement on the
Batkivshchyna party’s website.

A political analyst in Kiev said, however, that neither
Azarov nor powerful Energy Minister Yuri Boiko were in any
political danger of being axed.

“It is more of a blow for the image of Ukraine,” said
Mikhailo Pogrebinsky of the Kiev centre of political research,
adding that no money had been stolen from the country.

The state investment agency’s chief, Vladislav Kaskiv, has
said Ukraine will press ahead regardless with construction of
the LNG terminal which will allow Ukraine to import gas from
suppliers in the Caspian and the Gulf at a price much lower than
that charged by Russia’s Gazprom.

Initially he had said Gas Natural would have a 75 percent
stake in the projected two-party consortium and the former
Soviet republic would own the remaining 25 percent.

Ukraine’s reliance on gas coming by pipeline from Russia has
been a source of repeated friction between the two countries and
many Ukrainians view it as an unacceptable instrument of
continued influence by Moscow.