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[ Ukraine Crushed in Fraudulent $1.1Billion Gas Deal ]

What should have been a landmark natural gas deal for Ukraine has devolved into a bizarre and embarrassing debacle, as it became apparent this week that the $1.1 billion agreement the government signed Monday was not legitimate.

Ukraine’s Prime Minister Mykola Azarov and Energy Minister Yurly Boyko presided over a live televised signing ceremony for the supposed deal with Spain’s Gas Natural Fenosa, which would have secured $1.1 billion in investment for the construction of Ukraine’s first liquid natural gas (LNG) terminal on the Black Sea and a pipeline connecting the country’s vast gas network to the terminal.

More to the point, the deal would enable Ukraine to import by tanker up to 10 billion cubic meters of European gas at a price 20 percent lower than that charged by Russia’s Gazprom. That would be a major first step toward reducing Ukraine’s dependence on Russia.

Here’s the rub: Fenosa apparently had no idea it was signing a landmark agreement with Ukraine. The man supposedly signing on behalf of Fenosa, identified as Jordi Sarda Bonvehi, has no affiliation with the company, according to Fenosa. It remains unclear how Ukrainian authorities were led to believe—during multiple rounds of negotiations—that Bonvehi was a Fenosa representative.

Authorities in Kiev said that Bonvehi was under the impression that Fenosa would sign the deal with Ukraine and that he would be given the authority to sign the deal retroactively.

But Fenosa denies it has ever considered such a deal and continues to deny any relationship at all with Bonvehi.

The collapse of the deal leaves Ukraine in the lurch, with much-needed funds for the terminal’s construction potentially up in smoke. Ukraine’s state investment agency reportedly said Thursday that it was in contact with Fenosa “to settle the question of the Spanish company’s participation in the LNG terminal project.”

A version of this post originally appeared at OilPrice.com and has been republished with permission.

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