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Russia ready to start gas supplies to Ukraine after partial debt repayment — minister

September 30, 2014, 14:37 UTC+3 ATYRAU

Russia's energy minister said Ukraine is ready to repay $3.1 billion

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ATYRAU /Kazakhstan/, September 30. /ITAR-TASS/. Russia is ready to restart natural gas supplies to Ukraine, if Kiev makes a partial $2 billion debt repayment and prepays for the new supplies, Energy Minister Alexander Novak said on Tuesday.

“On our part, we are practically ready to do everything on a package we have agreed upon. We’ll wait for a reaction from the Ukrainian side in the coming days,” Novak said in response to a question about the possibility of signing a gas agreement already this week as part of consultations between Russia and Ukraine with the EU’s mediation.

Infographics Ukraine’s debt burden

Ukraine’s debt burden

August 29, IMF Board of Directors discusses the second tranche for Ukraine amounting to $1.4 billion, which was postponed due to instability in south-eastern Ukraine. The country received the first tranche in April 2014. Earlier, April 30, the IMF approved a two-year credit totaling $17 billion for the support of the economic program. Infographics by ITAR-TASS
The Russian energy minister said Ukraine is ready to repay $3.1 billion in debts for Russia’s natural gas.

“They [Ukrainians] calculated this sum at the price, which they devised - $268.5, at the virtual price,” Novak said.

According to Gazprom’s data, Ukraine’s debt for natural gas supplied to the ex-Soviet republic totaled about $5.296 billion as of August 1, 2014 (excluding debts under “take or pay” contractual obligations), including $1.451 billion owed for supplies in November-December 2013 and about $3.845 billion for April-June 2014.

The Russian energy minister also said that the International Monetary Fund had already provided money to Ukraine for debt repayment.

“We are talking about $1.9 billion, which is the cost of 5 billion cubic meters of gas, which they [Ukrainians] want to receive as a minimum volume and have to make a prepayment while $3.1 billion should be paid in two tranches [as debt repayment],” the Russian energy minister said.

“Our position is as follows: $2 billion [must be repaid] - before the start of supplies and $1.1 billion - before the New Year,” the Russian energy minister said.

According to Novak, Ukraine proposed transferring money in three tranches and make payments after the start of supplies.

“This is a principal thing. We agree to Ukraine repaying $3.1 billion but there are some positions on the timeframe that have not been finally agreed and which, as we hope, will be agreed this week,” Novak said.

“We have bills, which we have presented [to Ukraine]. They remain. The remainder sum will be determined after a ruling by the Arbitration Court. It is important for us that a part of the debt be repaid before the start of supplies. There can be no talk about any new deliveries, unless a part of the debt [$2 billion] is repaid,” the Russian energy minister said.

Russia-Ukraine gas dispute

Russia raised the gas price for Ukraine from $268.5 to $485.5 per 1,000 cubic meters from April 2014. Ukraine said it would not pay for Russian natural gas supplies at such a high price.

The Ukrainian national energy company Naftogaz stopped paying for Russian natural gas supplies from March 25, 2014.

After Russia and Ukraine failed to reach a compromise on the gas issue, Naftogaz and Gazprom filed mutual claims to the Stockholm Arbitration Tribunal.

The gas price for Ukraine has increased, in particular, by $100 per 1,000 cubic meters since April 1, 2014 after Russia denounced the 2010 Kharkiv accords on extending the lease of the Russian Black Sea Fleet’s base in Crimea in exchange for a gas price discount. The accords were denounced after the Black Sea peninsula joined Russia in the spring of 2014.

Russia also offered Kiev the second discount as part of an anti-crisis aid package for Ukraine in November 2013 but scrapped it from April 1, 2014 over Ukraine’s failure to repay its debts for Russian natural gas supplies.

In June, Gazprom halted gas supplies to Ukraine over its unpaid debt.

The average price of Russian natural gas supplies to Europe currently stands at $380-390.

Gazprom offered Ukraine a $100 price discount in August. Kiev rejected the offer, insisting on setting gas prices without any discounts.

“We again hear the price of $385 based on a $100 discount from the price of $485 due to the customs duty cancellation. This means that the Russian side considers the price of $485 to be fair and consistent with market trends. However, we believe this is a discriminatory price,” Ukrainian Energy and Coal Minister Yuriy Prodan said at the time.

The EU believes it is possible to set the price of Russian natural gas for Ukraine at $385 in winter and $325 in summer.

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