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Russia to supply gas to Ukraine on prepaid basis from June 1

May 08, 2014, 21:41 UTC+3 MOSCOW
"Ukraine’s overall debt for gas has reached 3,508 billion U.S. dollars up to date,” Energy Minister Alexander Novak said
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© ITAR-TASS/Vitaly Grabar

MOSCOW, May 08. /ITAR-TASS/. Russia will supply natural gas to Ukraine on a prepaid basis from June 1, Energy Minister Alexander Novak said on Thursday, May 8.

“May 7 was the last day when Ukraine had to pay for the gas supplied. We have not received any payment from Naftogaz of Ukraine since March of this year. Ukraine’s overall debt for gas has reached 3,508 billion U.S. dollars up to date,” he said.

In accordance with Clauses 5.1.5 and 5.8 of the contract for the supply of gas made by and between Gazprom and Naftogaz of Ukraine in 2009, failure to perform the obligations entails an automatic transition to gas supplies on a prepaid basis from June 1, 2014, Novak said.

On May 16, Gazprom will issue a preliminary bill for the supply of gas in June. Ukraine will have an opportunity to pay this bill by May 31, in which case the amount of gas to be supplied in June under the advance payment will not exceed the volume paid for until May 31.

“The Russian position on support for the Ukrainian economy was stated in President Vladimir Putin’s letter [to European leaders on April 10] and said that Russia could no longer and should not alone bear the burden of support for the Ukrainian economy by giving it gas price discounts and forgiving debts, thus paying with its subsidies for the trade deficit in Ukraine and EU countries,” Novak said.

Ukraine is ready to pay the debt for Russian gas within ten days if its price is set at 268.5 U.S. dollars per 1,000 cubic metres, parliament-appointed Prime Minister Arseny Yatsenyuk said.

“We have sent a proposal to Russia’s Gazprom to extend the contract at a price of 268.5 U.S. dollars per 1,000 cubic metres as in the first quarter of 2014. As soon as this price is set and an additional agreement is signed, Ukraine will be prepared to pay all debts within ten days, including the debts of the previous government,” Yatsenyuk said.

However, Novak said that Ukraine had no right to revise the price of gas from Russia unilaterally.

He recalled that the contract signed 2009 was still in force. “The contract has been in effect for five years and has been implemented. Ukrainian Energy and Coal Industry Minister Yuri Prodan reaffirmed this yesterday,” he said.

Under the contract, the price of gas supplied to Ukraine is determined by the formula that is pegged to the price of oil. “This formula is used everywhere in the world for pipeline gas supplies. Therefore there are no grounds to discuss the price today and especially unilaterally offer the first quarter price of 268 U.S. dollars per 1,000 cubic metres as the Ukrainian authorities are doing,” Novak said.

Parliament-appointed acting President Alexander Turchinov on May 1 instructed the Ministry of Energy and Coal Industry to secure gas supplies from Russia at the price that was in effect in February and March 2014.

If Russia disagrees to meet the demand, the relevant Ukrainian ministries and agencies have been instructed to “file a corresponding lawsuit with an international court of arbitration within a month of the receipt of the notice”.

Prodan said Ukraine was ready to pay its debt to Russia’s Gazprom for gas supplies at a price of 268.5 U.S. dollars per 1,000 cubic metres.

“Ukraine is ready to pay the debt. But we cannot pay the price Gazprom set from April 1. It is unjustifiably high and is about 500 U.S. dollars. We are ready to pay under our obligations,” the minister said.

He disagreed with price of gas set by Gazprom which put Ukraine’s debt for gas at 3.5 billion U.S. dollars.

Yatsenyuk also reiterated that Ukraine was prepared to pay the price of 268 U.S. dollars per 1,000 cubic metres of Russian gas.

This is 45% below the established price of gas. If Moscow disagrees, Kiev will be prepared to contest its debt in court, he said.

Gazprom spokesperson Sergei Kupriyanov said Ukraine had so far not paid the gas debt. “The deadline for payments for April has passed. Nothing was paid. Ukraine’s overdue debt for the Russian gas has increased to 3.508 billion U.S. dollars,” he said.

Now that the debt has not been paid, Gazprom will start supplying gas to Ukraine against advance payments from June.

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