Ukraine: the $1bn deal that never was.

Ukraine’s government on Monday rolled out the red carpet for a highly-publicised signing ceremony for a landmark energy deal.
But the event, attended by Prime Minister Mykola Azarov and Energy Minister Yuriy Boyko, quickly spiralled into a fiasco, with denials and confusion over what has actually been signed – and by whom.
“This is a historic moment… We’ve taken the first really big step in securing Ukraine’s energy independence,” Azarov announced proudly in Kiev, and ordered construction to begin on a project involving the building of Ukraine’s first LNG terminal.
Live video feed demonstrated welders far away in Odessa region at work as they commenced construction on a pipeline that would connect Ukraine’s vast gas transit network with the proposed Black Sea coast LNG terminal.
Minutes later, with Azarov and Boyko looking on, attention turned to a signing ceremony between “investors” and Vlad Kaskiv, head of Ukraine’s state investment agency.
Journalists were told by Kaskiv that the “investors” had signed agreements to lead a newly-formed consortium – still open to other partners – to build the terminal at a cost of $1.1bn.
Upon completion in coming years, Kaskiv said the LNG terminal would allow Ukraine to import 5-10 bn cubic metres of gas shipped by tanker at a cost 20 per cent lower than the price Ukraine is charged by Russia’s Gazprom.

So far, so good.
The lead investor in the new consortium was identified by Kaskiv as Gas Natural Fenosa, the Spanish energy group. Signing on behalf of Fenosa was a Spanish-speaking man that Kaskiv and his subordinates identified as Jordi Sarda Bonvehi (pictured above, left).

Herein lies the problem.
Officials at Gas Natural Fenosa claim they don’t know Sarda Bonvehi. They say he does not represent their company or its subsidiaries. And, the company has not signed any agreement with Ukraine.
Shocked by news reports suggesting Gas Natural Fenosa had signed agreements to join the consortium, and lead efforts to raise financing for it, the company’s press service issued the following statement:

Gas Natural Fenosa has not signed any contract to invest in a LNG plant project in Ukraine, nor is it leading any consortium whatsoever for the development of the aforementioned terminal. Gas Natural Fenosa has nothing under study in this regard, nor does it have representatives working in Ukraine on this issue. We categorically deny the news reports which have been circulating throughout the day in various media.

Here’s where it gets really strange.
Ukrainian officials claim to be baffled by Gas Natural Fenosa’s statement. They claim to still believe that an agreement was reached with Gas Natural Fenosa. Speaking with beyondbrics, Kaskiv said it was the understanding of his state investment agency that Sarda Bonvehi represents the interests of Gas Natural Fenosa. He and other Ukrainian officials claim to have held negotiations with Gas Natural Fenosa, with Sarda Bonvehi playing the role of a negotiator of sorts. Officials at Gas Natural Fenosa steadfastly deny this.

Beyondbrics tried to talk to Sarda Bonvehi at the signing, but he declined to comment.
Describing the turn of events as “disappointing,” a spokesperson for Ukraine’s prime minster stressed that the country would pursue construction of the strategic LNG terminal – with or without Gas Natural Fenosa, or other investors.
But with its 2012 budget deficit widening, with its economy on the verge of economic recession and government cut off from billions of dollars of International Monetary Fund loans due to lacklustre reform efforts, does Ukraine’s government have the financial fire power to bankroll this project alone? Or will it fall into the hands of billionaire oligarchs that have deep pockets, but already have a powerful hold the country’s economy?