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Ukraine ready to buy Russian gas for $268 per 1,000 cm

April 05, 2014, 23:07 UTC+3 KIEV
"We do not accept the price of $500", said parliament-appointed Prime Minister Arseny Yatsenyuk
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KIEV, April 05. /ITAR-TASS/. Ukraine is ready to buy Russian natural gas at a price of $268 per 1,000 cubic metres, parliament-appointed Prime Minister Arseny Yatsenyuk said on Saturday, April 5.

He said Ukraine “does not accept” Russia’s decision to raise the price of gas from April 1 and regards it as “political pressure”. “Political pressure will not pass. We do not accept the price of $500. Ukraine is ready to continue buying natural gas at the price that was in effect since the beginning of the year - $268. This is an acceptable and balanced price,” Yatsenyuk said.

He reiterated Kiev’s readiness to “make all payments for the previous gas supplies” and was waiting for Russia’s reply.

Gazprom CEO Alexei Miller said on Saturday that “the debt situation cannot continue endlessly. We cannot supply gas for free. The debt must be paid. And current deliveries must be paid in full, too. ”

He stressed that the debt was growing by the month and now only 20% of payments were collected, compared to about 50 percent just recently.

As a result, “Ukraine’s debt to Russia will grow by $5.6 billion by the end of the year. This is a huge amount of money. This is a very tangible negative result for Gazprom,” he said, adding that this money was already included in the company’s investment plans and budget.

Miller noted that the persons who were insisting on the revision of the gas contracts with Russia had helped to draft them in the past. “The most interesting part is that the people who have come to power [in Ukraine] took part in the drafting and signing of the contracts that are now in effect. Specifically these are Fuel and Coal Industry Minister Yuri Prodan who was a member of the delegation led by [then Prime Minister] Yulia Timoshenko, and the new Naftogaz Ukrainy CEO who was appointed several days ago. In 2009, he worked in Naftogaz Ukrainy in a less senior position but he, too, was directly involved in the preparation of these contracts,” Miller said.

He stressed that Yatsenyuk, who was a presidential candidate in 2009, was well aware of what the Timoshenko government was doing and how.

Yatsenyuk stressed that the Russian gas price hike would have a negative impact on industrial enterprises and the population. “The price rise to 500 U.S. dollars will mean a blow to chemical enterprises, metallurgical enterprises and people,” he said.

He said Kiev “will use in relations with the Russian monopoly Gazprom all methods to settle the situation, including international law”.

Yatsenyuk said Ukraine should get prepared for cuts in gas supplies from Russia. “We understand that the next step will be the limitation of natural gas supplies from Russia,” he said.

He instructed Energy and Coal Industry Minister Yuri Prodan to “prepare two scenarios” one of which would envision “supply cuts from Russia”.

Prodan said Ukraine might go to the Stockholm arbitration court to revise the price of Russian gas if the talks with Gazprom failed to produce a solution. “If we do not come to agreement, the procedure is provided for in the contract [of 2009] - taking the case to the Stockholm arbitration court,” the minister said.

He believes that Kiev still has time for talks with Moscow.

Prodan said the price of $485.5 per 1,000 cubic metres of Russian gas was too high a price. “This is an exorbitantly high price and Russia should understand that there are no other such [price] analogues,” he told a news conference in Kiev.

The minister said it would be less costly for Ukraine to import gas from Europe.

Speaking about the price for the transit of Russian gas through Ukraine to Europe, Prodan said. “It’s subject to negotiation.”

He said Ukraine would like to go back to the agreement with Russia reached in late 2013, which allowed Kiev to buy Russian gas at a price of 268.5 U.S. dollars per 1,000 cubic metres and get a $15 billion loan from Russia.

“We have to begin negotiations in order to go back to that price. This is probably the price that ensured stable work of our gas transportation system,” the minister said.

The agreement envisaged the disbursement of two billion U.S. dollars to Ukraine in 2014, which Kiev would automatically have used to pay the debt for Russian gas, which Prodan estimated at about two billion U.S. dollars.

Russia abolished the zero duty on gas for Ukraine on April 3, which will automatically raise the price of gas for Ukraine from April 2014 to 485 U.S. dollars per 1,000 cubic metres, an increase of more than $200 from the price that was used until now.

In December 2013, Russian Gazprom and Naftogaz Ukrainy signed an addendum to the gas agreement in effect from January 19, 2009, under which the price of Russian natural gas for Ukraine was to be reduced by one-third to $268.5 per 1,000 cubic metres from January 1, 2014, compared to $410 per 1,000 cubic metres in the fourth quarter of 2013.

Moscow and Kiev also agreed that the discount would remain in effect as long as the key conditions were met, specifically timely payments for current supplies and repayment of debts.

At the end of the first quarter of 2014, Gazprom said it would have to raise the price of gas for Ukraine by more than $100 to $385.5 per 1,000 cubic metres because Ukraine had failed to pay the debt for the gas delivered in 2013 and had not made payments for current supplies.

In March, Russia supplied 1,956 million cubic metres of gas to Ukraine and “has not received a kopeck” for it so far. “The debt has increased and exceeded $2.2 billion. The situation is not improving. It is actually getting worse,” Miller said.

The new rise in the price of gas by another $100 to $485.5 per 1,000 cubic metres announced on April 3 is a result of the abolition of the zero export duty on gas for Ukraine.

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