Gazprom debt burden to speed up gas crisis end

By Dmitry Zhdannikov - Analysis

MOSCOW (Reuters) - Russia cannot afford to keep its gas taps for Europe turned off for too long as it needs to protect its budget revenues and its gas monopoly Gazprom needs to service its $60 billion (39 billion pounds) debt.

Gas exports account for about a tenth of Russia's GDP, but these have been halted for nearly a week in a dispute with neighbouring Ukraine, the transit route for 80 percent of the gas Russia sells to Europe.

Analysts say Gazprom, a pillar of the Russian economy, is losing more than $100 million a day because of the transit cut-off.

The loss of revenue comes at a bad time both for Russia, facing plummeting oil prices and the prospect of a recession, and for Gazprom, saddled with debt and likely to find gas prices falling by half by mid-2009 as they track crude.

"Gazprom faces demand destruction, falling prices, and huge challenges to finance its ambitious investments and manage its debt burden," said Douglas Busvine, an analyst at policy research firm Medley Global Advisors.

"Both it and the Russian state can ill afford the revenue hit that a prolonged loss of export revenues would cause."

FRAGILE ECONOMY

Russian gas supplies to Europe via Ukraine have been halted due to a pricing row between Moscow and Kiev..