Ukraine contacts Spanish firm after $1 billion gas deal fiasco

KIEV Thu Nov 29, 2012 4:39pm GMT

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KIEV (Reuters) - 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 liquefied natural gas (LNG) terminal on the Black Sea coast with an unauthorized man, mistakenly believing he was acting for Gas Natural Fenosa (GAS.MC).

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-energized 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 (GAZP.MM).

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.

(Additional reporting by Fiona Ortiz in Madrid; Writing By Richard Balmforth; editing by Ralph Boulton)

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