On June 11, Alexei Miller, the chief executive officer of Russian state-controlled energy giant Gazprom, announced that Russia will not demand any prepayments for the gas supplies until June 16 as European Union-brokered talks take place in Brussels.
Moreover,
Russia’s Energy Minister Aleksandr Novak said that the price for Gazprom’s gas,
which Russian side wants to be at $385, may be reduced by $100. However, he did
not disclose what are the conditions for such a discount.
Ukrainian Prime Minister Arseniy Yatsenyuk does not see this as a favorable deal. “All the gas discounts are being passed by the Russian government and cancelled by the Russian government,” he said referring to the unreliability of the offer. Yatsenyuk added that Ukrainian side insists on making changes to the gas contract.
European
Commission’s energy officer Gunther Oettinger, who is actively participating in
the negotiations, said that Russia is offering a price which is closer to being
a fair market one.
Russian President Vladimir Putin said that Russia’s proposal on a gas discount for Ukraine is more than a partnership one but if it is rejected, relations between Moscow and Kyiv will go a different route.
On June 11,
Ukrainian Energy and Coal Industry Minister Yuriy Prodan suggested that Russia’s
price was not the best available deal for Ukraine.
“We have a
lot of proposals. These are proposals on the reverse gas supplies at a lower
price (less than $385 per 1,000 cubic meters). Taking into account the transit
which is carried out through the territory of Ukraine to European countries and
back, the we can say that the price set by Gazprom could be even lower than the
one which is currently offered by European suppliers,” said Prodan,
according to Interfax Ukraine news agency.
Kyiv has been
insisting on paying $268.5 per thousand cubic meters, per the terms of a deal
orchestrated by former Ukrainian President Viktor Yanukovych in December of
2013.
If no deal is
reached, Prodan said that Ukraine would be prepared to resolve the issue at the
Stockholm International Arbitration Court.
He also said that
if Russia elects to shut off gas flows to Ukraine, the country is considering
using reverse flows of gas from Europe.
Institute for
Energy Strategies’ analyst Yuriy Korolchuk admits that it is always better to
go to court to sue the gas pricing with all the debts settled. However, this
remains a complicated issue since the size of Ukraine’s debt depends directly
on the pricing.
Gazprom claims
Ukraine owes it $1.45 billion for rule supplied in November and December last
year and $3 billion for April and May.
However, Novak of
Russian Energy Ministry states a different figure – $1.45 billion for November
and December and $500 million for April and May.
On May 30 Ukraine’s
state-run oil and energy monopoly Naftogaz repaid $786 million of its debt, and
Gazprom confirmed this.
Timothy Ash, an
analyst with Standard Bank in London, believes the two sides are approaching a
deal, and that politics has been the main barrier to an agreement thus far.
“On the
issue of gas, the two sides are not a huge distance from a deal, but all this
is tied to bigger picture geopolitics and a deal to bring some form of peace to
SE Ukraine, and broader stability to Ukraine,” says Ash.
A gas
deal, Ash says, might presage a political agreement to resolve ongoing dispute
between the Kremlin and the Ukrainian government that has resulted in violence
between Russian-backed separatists and the Ukrainian army in eastern Ukraine.
Ash believes
that “Both sides are still using the gas issue to extract leverage over a
political settlement, so when/whether we get a settlement over gas will be a
good signal as to whether the two sides are making progress towards a broader
settlement of the still substantial issues on the political front.”
Oettinger,
the EU Energy Commissioner, said that the negotiations between Kyiv and Moscow
might include Russian President Vladimir Putin and Ukrainian President Petro
Poroshenko as early as June 11, according to Interfax Ukraine. He suggested
that negotiations between the heads of state should happen alongside
discussions between European Commission officials, the heads of Gazprom and
Ukrainian energy corporation Naftogaz, and Russian and Ukrainian ministers.
Ukraine’s Prime Minister Arseniy Yatsenyuk said that country has 18.3 billion cubic meters of gas stored underground as for June 11, enough for Ukraine to survive without importing Russian gas and to ensure flows to Europe until October 2014.
Russia supplied Ukraine with around 28 billion cubic
meters of gas last year, while 20 billion came from home production and another
2 billion came from the European Union through reverse flows.
Kyiv Post staff
writer Isaac Webb can be reached at [email protected] and on twitter at @isaacdwebb
