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UBS Says Gazprom Customs Claim Unlikely, Keeps ‘Buy’

November 25, 2009

UBS AG said Russia’s Federal Customs Service probably won’t succeed in forcing OAO Gazprom to pay an additional $13 billion in duties and recommended investors buy shares of the world’s largest gas company.

“The probability of this outcome is low since Gazprom should have enough lobbying power to eliminate the customs service claims,” UBS analysts Maxim Moshkov and Constantine Cherepanov said in a report today.

New rules for declaring gas shipments abroad may force Gazprom to divert “significant” finances, posing a “serious problem,” the Russian gas-export monopoly said yesterday. Since April, customs inspectors have required declarations for gas supplies at the border, rather than upon delivery in Europe, and refused to account for the difference in volumes, Gazprom said in a third-quarter report on its Web site.

Inspectors have demanded full payment based on the so- called temporary declarations and charged penalties since September, the state-run company said.

“If the export duty claim is satisfied, then we estimate the negative impact in this worst case scenario at $2.27 per American depositary receipt, or 9 percent of the current level and 7 percent of the UBS price target,” Moshkov and Cherepanov wrote in the report.

Gazprom and the customs service both declined to comment on a report in the Vedomosti newspaper yesterday that the new requirements may cost the company 380 billion rubles ($13.2 billion) in duties and fines this year and next year.

Gazprom shares lost 1.23 rubles, or 0.7 percent, to trade at 174.57 rubles as of 2:48 p.m. in Moscow today, after declining 1.85 percent yesterday.

The customs service’s claims may be an attempt to tax exports of Central Asian gas, which Gazprom buys and re-sells to Europe, the UBS analysts said. Gazprom halted supplies from Turkmenistan, holder of the world’s fourth-largest gas reserves, after an explosion on a trunk pipeline in April and is negotiating new volumes and prices.

Russian Energy Minister Sergei Shmatko said on Nov. 20 the government will hear both sides of the argument and “will draw a line under the issue” within a month.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at

To contact the editor responsible for this story: Guy Collins at

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