bne IntelliNews -

Russia's Gazprombank wants Ukrainian oligarch Dmitry Firtash' gas trading firm Ostchem to repay a $842.5mn loan, because of breach of conditions relating to the loan, the bank said in a press release, without specifying what conditions had been breached.

The loan was guaranteed by four fertiliser plants owned by Firtash' holding structure Group DF, and secured by 5.67bn cubic meters of gas held by the plants in Ukraine's underground storage.  

The loan was used to purchase the gas from Russia's Gazprom, at a price of $268.5 per 1,000 cubic metres, significantly lower than the price paid by Ukraine's energy company Naftogaz for Russian gas, according to a recent investigation by Reuters.

The loan is to be repaid by December 30, otherwise Gazprombank will demand return of the gas, the bank said in its press release.

A number of Firtash's chemicals plants are currently idling, and the group may be unable to raise the funds to pay down the loan. This raises the prospect of a conflict between Russia and Ukraine over control of the gas.

Ukraine's government has prohibited chemical plants from drawing on gas used in underground storage, as the country faces both energy and hard currency shortages, thus effectively declaring all gas held in the underground storage to be an emergency reserve. Group DF lost a court case disputing the government decision. The government has also ordered the country's largest gas consumers to buy gas exclusively from state company Naftogaz.

Russian President Vladimir Putin earlier stated that Ostchem had $1.4bn in debts to Gazprombank. Ukraine's state company Naftogaz owes Gazprombank another $1.8bn. Gazprombank for its part has been placed under sanctions by the US and EU, blocking access to international capital markets.

Ukraine in the first week of December paid around $370mn to Russia's Gazprom to import 1,000 cubic metres of gas. But Ukraine's Naftogaz must still pay $1.6bn to Gazprom by the end of the year as the second tranche of arrears payments stipulated by a trilateral agreement signed on October 30 between Russia, Ukraine and the EU. Ukraine's national hard currency reserves fell to only $9bn at the end of November, and without external support are expected to fall to around $7bn by the end of 2015, providing only four weeks import cover.