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Russia, Ukraine, EU to discuss in Brussels interim conditions for gas supplies to Ukraine

October 21, 2014, 3:26 UTC+3 BRUSSELS
Gazprom will supply 5 billion cubic meters to Ukraine at $385 per 1,000 cu
1 pages in this article
© EPA / SERGEI KOZLOV

BRUSSELS, October 21. /TASS/. Tripartite gas meeting of Russia, Ukraine and the European Union in Brussels on Tuesday will feature Russia’s Minister of Energy Alexander Novak, Ukraine’s Energy and Coal Minister Yuri Prodan and the EU Energy Commissioner Guenther Oettinger.

Participants in the meeting will discuss terms of Russian gas supplies to Ukraine under a interim agreement. A lack of agreement of the kind threatens stability of the gas flow through Ukraine to the EU countries, due to Ukraine’s possible taking of gas in the winter period to satisfy its own demand.

Ukraine has argued provisions of the current contract with Gazprom at Stockholm’s arbitration court. Gazprom in its counterclaim also argues breached obligations under the contract. Since the court proceedings continue, in order to continue supplies the parties require a temporary solution, which would allow the sides to keep their positions at court. The relations between Ukraine and Russia in the gas sphere are regulated by a contract on gas supplies and a contract on transit of 2009.

The previous three-party gas talks were held on September 26 in Berlin where Russia, Ukraine and the EU prepared a new package deal on settling the gas dispute, which needed to be approved by the governments of the relevant countries.

Under the new deal, which the EU energy commissioner voiced, Ukraine should repay its $3.1 billion debt to Gazprom by the end of this year for natural gas supplied to the ex-Soviet republic. In turn, Gazprom will supply 5 billion cubic meters of natural gas to Ukraine and offer an option for another 5 billion cubic meters.

Gazprom will supply 5 billion cubic meters to Ukraine at $385 per 1,000 cu m. This price includes a $100 discount and will be effective only for six months.

After Kiev repays $2 billion in debt, Gazprom will supply at least 5 billion cu m to Ukraine and these deliveries will be obligatory for both sides.

However, the Ukrainian side again said it did not support the agreements certain provisions. At the previous round of talks, the Ukrainian delegation suggested settling the debt in three tranches instead of two: $1.5 billion and twice $800 million, thus the final settlement would be due in March 2015. Ukraine does not comment on the fact about sufficient funds in the budget to settle the debt. The Ukrainian side also insists the supplies are not based on prepayment, but should be paid for as the gas arrives; and in the low consumption period between April 15 and October 15 the gas price should be $325.

Beyond the talks on the interim agreement, the Ukrainian side insists on revision of the agreement on transit and selling of the Russian gas to European consumers at the border between Ukraine and Russia, which actually will let Ukraine earn more for its transit services. Ukraine also wants to amend the current contract with a provision about a commercial discount instead of compensation by means of export duties.

On October 17, settlement of gas disputes with Ukraine was a key topic of the negotiations in Milan at the ASEM summit between Russia’s President Vladimir Putin and Ukraine’s President Pyotr Poroshenko, Germany’s Chancellor Angela Merkel and France’s President Francois Hollande.

A bilateral meeting featuring the Russian and Ukrainian delegations offered the following compromises, which may be confirmed at the meeting on October 21: Ukraine is obliged to pay $1.45 billion of the debt before end of October and another 41.65 billion before the yearend. Besides, the agreed temporary price of $385 per 1,000 cubic metres would be valid for the supplies in winter season under the condition of prepayment. In order to be able to buy gas on the prepayment basis, Ukraine jointly with the EU will have to find before the yearend about $1.6 billion in a bridging loan or guarantee from first-class financial institutions.

However, at the EU ministerial meeting in Luxembourg on October 20, foreign ministers did not discuss allocation of additional money to Ukraine, Luxembourg’s Foreign Minister Jean Asselborn told TASS.

He said, Ukraine does not have money to pay for the gas. Russians want to receive their money, but the European Union should be paying?

On Monday, October 20, a European source confirmed to TASS the European Commission had received a request from Ukraine about additional short-term financial assistance. The source did not quote the amount requested.

In the Conclusions on Ukraine, the European Council said: “The Council supports the Commission's efforts in seeking an interim agreement for the resumption of gas supplies by Russia to Ukraine and recalls the urgency for the sides to reach an agreement on the basis of the Protocol proposed at the latest trilateral meeting. Such an agreement, as well as urgent and long-term measures to improve energy efficiency in Ukraine, are critical for safeguarding the security of supply and transit this winter.

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