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Russia firmly stands by all provisions of gas deal with Ukraine - Putin

May 24, 2014, 18:18 UTC+3 ST. PETERSBURG
Ukrainian state energy company Naftogaz’s debt to Moscow currently stands at about $3.5 billion with the gas price standing at $485.5 per 1,000 cu m
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© ITAR TASS/ Michael Mitcel

ST. PETERSBURG, May 24 /ITAR-TASS/. Russia strictly abides by all provisions of the gas contract with Ukraine, but will discuss price discounts for the Russian gas only after Ukraine repays its previous debts, President Vladimir Putin said on Saturday.

“Russia firmly sticks to each letter, period and coma in the contract,” he said adding that Russia was interested in supplying gas “to responsible buyers, who pay the price stated in the contract.”

The president said he was indeed surprised that Russia should reduce the gas price for Ukraine, which failed to repay the previous debts. He reiterated that Russia’s previous gas price discount for Ukraine was tied to the lease of the Black Sea port of Sevastopol.

Ukrainian state energy company Naftogaz’s debt to Moscow currently stands at about $3.5 billion with the gas price standing at $485.5 per 1,000 cu m. European consumers are afraid the situation may affect transit gas supplies to Europe.

On April 10, Russian President Vladimir Putin sent a letter on the situation in Ukraine to the leaders of 18 European countries who buy Russian natural gas. In the letter, he explained in detail the current critical situation with Ukraine’s debt for Russian gas supplies, which could affect gas transit to European consumers.

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. Russian energy giant 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, 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.

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