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Ukraine’s claim to Crimea should not be linked to three-party gas talks - Oettinger

May 28, 2014, 23:35 UTC+3 BRUSSELS
Ukrainian state energy company Naftogaz is ready to transfer $2 billion as a down payment for its debt to Russian state energy giant Gazprom on Thursday
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BRUSSELS, May 28 /ITAR-TASS/. The European Union has recommended Kiev not to link Ukraine’s claims to Crimea’s gas reserves with the three-party talks on repayment of Ukraine’s debt for Russian gas supplies, European Commissioner for Energy Guenther Oettinger said Wednesday.

With Crimea’s secession, Ukraine assessed that it incurred losses of billions of dollars, Oettinger said. He said this is a legal position Europe can support, adding that the EU believes Crimea’s accession to Russia is unacceptable, but warned that inclusion of the Crimean issue in the gas talks may deadlock them.

The energy commissioner said Ukraine’s financial claims against Russia on Crimea, including via the Stockholm Arbitration Institute, may take many months to deal with.

Oettinger said that is why the EU is calling on Ukraine not to peg the issue to the current three-party gas talks and not try to resolve it within the next few days or weeks.

Oettinger said Monday at after three-party gas talks involving Russia, Ukraine and the EU that Ukrainian state energy company Naftogaz is ready to transfer $2 billion as a down payment for its debt to Russian state energy giant Gazprom on Thursday.

Ukraine gas debt

Ukrainian state energy company Naftogaz’s debt to Moscow currently totals some $3.508 billion with the gas price standing at $485.5 per 1,000 cu m. European consumers have voiced fears that 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 European Union 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, 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 is no longer applied, raising the gas price by another $100 to $485.5 per 1,000 cu m.

Ukraine saw a coup in February, with new people brought to power amid riots as President Viktor Yanukovich had to leave the country citing security concerns. Crimea refused to recognize the new Kiev authorities and seceded from Ukraine to join Russia after a referendum in March.

Despite Moscow’s repeated statements that the Crimean referendum on secession was in line with the international law and the UN Charter and in conformity with the precedent set by Kosovo’s secession from Serbia in 2008, the West and Kiev have refused to recognize the legality of Crimea’s reunification with Russia.

Kiev recognizes a debt of $2.237 billion as of April 1 but does not start paying it off because it believes the price should remain at $268.5 per 1,000 cu m.

On April 28, Ukrainian parliament-appointed prime minister Arseny Yatsenyuk reported that the government decided 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.

Reverse supplies can only be carried out via local pipes and not through trunk gas pipelines linking Russia and 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.

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