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Earlier today, Miller had talks with Andrei Kobolev, the head of Ukraine’s national oil and gas company Naftogaz Ukrainy. After the talks, Gazprom said that with account for gas supplies in March, Ukraine’s debt has already exceeded $2.2 billion.
The consultations between Miller and Kobolev focused on the necessity for Kiev to take immediate measures to repay Naftogaz debts.
Relations between Russia and Ukraine broke down following a coup in Ukraine in February after months of anti-government protests that often grew violent. The protests began when President Viktor Yanukovych decided in November 2013 to suspend the signing of an association agreement with the European Union in favor of closer ties with Russia.
Yanukovych had to leave Ukraine citing security concerns in February, and new people were brought to power in Kiev amid deadly riots. Moscow does not recognize the new self-proclaimed Ukrainian authorities saying Yanukovych remains the only legitimate president of Ukraine.
Ukraine’s political crisis deepened when the Republic of Crimea and Sevastopol, a city with a special status on the Crimean Peninsula, where most residents are Russians, held a referendum March 16 in which an overwhelming majority of Crimeans voted to secede from Ukraine and join the Russian Federation. The reunification deals with Moscow were signed March 18.
The price for Russian gas for Ukraine in the second quarter was set at $385.5 per 1,000 cubic meters. Gazprom said earlier that the price rose due to the return to earlier contract agreements, as Ukraine failed to fulfill its commitments under an additional agreement concluded in December 2013, which obliged the country to pay for supplied volumes of Russian gas in time.
On April 2, Russian President Vladimir Putin signed a law on denunciation of the Kharkiv Accords with Ukraine, which were struck in 2010 and stipulated that Russia’s lease of naval facilities in Crimea [then part of Ukraine] would be extended by 25 years beyond 2017 - until 2042.
The Kharkiv deals envisioned a discount of $100 per 1,000 cubic meters on Russian gas for Kiev. Now that the accords have been denounced due to Crimea’s accession to the Russian Federation, the discount will no longer be applied, raising the gas price by another $100 to $485.5 per 1,000 cubic meters.
From the second quarter, Gazprom will have to pay 10% more for gas transit to European consumers via Ukraine. Gazprom has pledged to fulfill its commitments in full.
Gazprom today voiced concern about a substantial reduction of the gas reserves in underground gas storage facilities of Ukraine. In this connection, Miller said the reserves need to be replenished to ensure Ukraine’s domestic consumption in the upcoming winter, and, accordingly, fulfillment by Naftogaz of its commitments on unhindered transit of Russian gas to Europe.
The pumping of gas to Ukraine’s storage facilities usually starts April 1. The issue has been very urgent recently because uninterrupted transit of Russian gas to Europe in many respects depends on the amount of gas pumped to Ukrainian storage facilities.
Last year, Naftogaz started pumping gas in June, whereas the last 5 billion cubic meters required for winter were pumped to underground facilities by an independent gas trader, Ostchem, owned by Ukrainian businessman Dmitry Firtash.
Earlier, Gazprom said the volumes of gas in the underground facilities should total 19 billion cubic meters to guarantee that the transit is unhindered. Ukraine’s underground storage facilities currently contain 7.2 billion cubic meters of gas. With the current Russian gas price for Ukraine, some $5 billion will be required to pump the gas.
European partners may also help Ukraine. All the more so as the issue of gas prices for Kiev was discussed in Brussels at an EU-US Energy Council meeting by Secretary of State John Kerry, Deputy Secretary of Energy Daniel Poneman and EU representatives on Wednesday.