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WARSAW, May 02, /ITAR-TASS/. The Polish capital Warsaw will on Friday host three-party talks involving representatives of Russia, Ukraine and the European Commission on gas supply issues.
Russia will be represented by Energy Minister Alexander Novak, Ukraine by Ukrainian parliament-appointed Energy and Coal Industry Minister Yury Prodan, and the European Commission by European Energy Commissioner Guenther Oettinger.
According to the Russian Energy Ministry, the meeting will be devoted to “the search of a way out of the crisis situation connected with Ukraine’s payments for Russian gas".
The Russian delegation comprises Russian state energy giant Gazprom CEO Alexey Miller, representatives of the Foreign, Finance and Economic Development ministries, as well as a group of experts.
“Implementation of a contract to supply Russian gas to Ukraine, measures to ensure transit to Europe, as well as the issue of payment by the Ukrainian side of the cost of supplied gas in the context of the financial and economic situation in that country will be discussed at the talks,” the Russian Energy Ministry said.
According to Russia’s ambassador to the European Union, Vladimir Chizhov, the Russian side proposed holding such three-party consultations “to discuss the critical situation in the Ukrainian energy sector” on April 24, and then on April 28, but “Brussels was not ready for them” then. He said Moscow is set for “deep discussions of the entire situation in the energy sphere”.
Prior to the three-sided meeting in Warsaw, Oettinger will also meet with Polish Prime Minister Donald Tusk. Their talks will focus on the Poland-promoted initiative of a European energy union, whose key aim is to reduce the European Union’s dependence on Russian gas deliveries and to strengthen Europe’s positions in talks with Gazprom.
According to the Polish head of government, “the EU is concerned about what will happen to gas that should pass via Ukraine’s territory to those who bought the gas in line with mid- and long-term contracts”.
“Gas storage facilities in Ukraine are not full, and everyone is already thinking about winter,” he said. “In the conditions of the Ukrainian-Russian conflict, Europe is considering how the gas will get to Europe despite the current situation. We don’t have a fully alternative source [of gas supplies] yet.”
On Wednesday, Gazprom spokesman Sergey Kupriyanov told journalists that Ukraine’s overall debt for Russian gas grew to about $3.5 billion. “Taking into account the request by [Ukraine’s national oil and gas company] Naftogaz Ukrainy for April 30 add the volumes that we have already supplied that month, the overall debt of Ukraine for Russian gas preliminarily stands at $3.492 billion,” he said.
As of April 26, Naftogaz imported some 2.25 billion cubic meters of Russian gas worth $1.09 billion. For the remaining days, the requested import was 110 million cubic meters daily. So, Ukraine was due to import in April 2.7 billion cu m of gas. By May 1, Naftogaz’s debt grows by $1.3 billion to about $3.5 billion with the gas price standing at $485.5 per 1,000 cu m.
The European Commission earlier said it is ready to help Ukraine pay off its gas debt. But Prodan has not yet expressed readiness to pay for gas supplied by Gazprom.
On April 28, Ukrainian parliament-appointed prime minister Arseny Yatsenyuk reported that the government made the decision to start the procedure of suing Gazprom. He said “Ukraine is ready to pay $268 per 1,000 cu m of gas, and if Russia gives a positive answer on the price and extends the contract, Ukraine will without delay pay off its $2.2 billion debt to Gazprom”.
“Ukraine is awaiting a reply from Gazprom for 30 days, otherwise, [the country] will sue [Gazprom] in Stockholm,” Yatsenyuk said.
Also on April 28, Ukraine and Slovakia signed in Bratislava a memorandum of intent on organizing reverse supplies of gas to Ukraine. In line with the reached agreements, from October, supplies to Ukraine will total 3.2 billion cubic meters annually. In 2015, the volume may grow to 10 billion cu m.
The sides also agreed that they will consider whether it will be possible to organize reverse supplies via the transit pipe via which the Russian gas is delivered to Europe.
Meanwhile, the gas reverse agreement with Slovakia will not allow Ukraine to stop purchasing Russian gas. Internal consumption of gas in Ukraine totals 50 billion cu m annually, with its own production accounting for slightly less than a half.
The deal with Slovakia envisions reverse deliveries of 3.2 billion cu m, and a deal with Germany’s RWE on reverse gas supplies from Poland stipulates deliveries of 1.5 billion cu m. Possible reverse deliveries from Hungary can reach 5 billion cu m. Thus, Ukraine can only cover a third of its Russian gas imports due to supplies from Europe.
RUSSIAN GAS PRICE CHANGE FOR KIEV
Moscow recently substantially raised the price for gas supplied to Ukraine from the figure of $268.5 per 1,000 cubic meters agreed last year when an association agreement with the EU was shelved in November 2013.
In the second quarter of 2014, the price for Russian gas for Ukraine was set at $385.5 per 1,000 cu m. Gazprom said earlier that the price rose from $268.5 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 Kharkov 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 Kharkov deals envisioned a discount of $100 per 1,000 cu m 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 cu m, which is expected to make the economic situation in Ukraine even more complicated.
CRISIS IN UKRAINE
Ukraine is in political and economic turmoil following a coup that occurred in the country in February after months of anti-government protests triggered by Kiev’s decision to suspend an association agreement with the EU in November 2013 to study the deal more thoroughly.
New people were brought to power in Kiev amid deadly riots that involved radicals after President Viktor Yanukovich had to leave Ukraine citing security concerns in February 2014. Russia does not recognize the new Ukrainian authorities, who appear unable to restrain ultranationalists and radicals.
Ukraine’s crisis soured further when the Republic of Crimea, where most residents are Russians, refused to recognize the legitimacy of the new self-proclaimed Ukrainian leadership. Crimea held a referendum March 16 in which an overwhelming majority of Crimeans voted to secede from Ukraine and reunify with the Russian Federation. The accession deal with Moscow was signed two days later.
Kiev and Western nations do not recognize Crimea’s reunification with Russia despite Moscow's repeated statements that the Crimean plebiscite conformed to the international law and the UN Charter and was in line with the precedent set by Kosovo’s secession from Serbia in 2008.
Some Russian and Crimean officials and companies have been subjected to sanctions by Western nations after Crimea’s incorporation by Russia. Russia has also taken some limited punitive actions in response.
The West has threatened Russia with new economic penalties unless the country changes its foreign policy, but Moscow has dismissed the unfriendly measures saying the language of sanctions is counterproductive and will have a boomerang effect on Western nations.
After Crimea’s accession to Russia, protests against the new Ukrainian authorities erupted in Ukraine’s Russian-speaking southeastern territories, with demonstrators demanding referendums on the country’s federalization and taking control of some government buildings.
Ukrainian parliament-appointed interim head of state Alexander Turchinov on April 15 announced the start of an antiterrorism operation in the Donetsk Region in eastern Ukraine. Russia has condemned the operation, which is apparently aimed to crack down on federalization supporters.