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EU, Ukraine reach preliminary deal on financial guarantees of Russian gas supply — source

October 30, 2014, 15:50 UTC+3 BRUSSELS
Russian Energy Minister Alexander Novak and Gazprom CEO Alexei Miller have left Brussels but the main experts of the Russian delegation are still in the Belgian capital
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Infographics Russia’s and Ukraine’s  stance in gas dispute Russia’s and Ukraine’s stance in gas dispute
Russia and Ukraine strive to agree on gas price, but still without success. Infographics by TASS
BRUSSELS, October 30. /TASS/. The European Commission and Ukraine have achieved a preliminary agreement on the financial guarantees of the Russian natural gas supplies to Ukraine, a source close to gas talks told TASS on Thursday.

"The preliminary agreement will allow the sides to resume tripartite talks involving Russia. The Russian delegation will return to Brussels tonight to continue the talks," the source said.

The source said this gives a hope that an agreement will be reached with the Russian side on ensuring gas supplies to Ukraine and gas transit to the European Union during the winter season.

Another source, who attended the negotiations, told TASS only the heads of the Russian delegation, Russian Energy Minister Alexander Novak and Gazprom CEO Alexei Miller, have left Brussels.

“The main experts of the Russian delegation are still in the Belgian capital,” the source said.

A spokeswoman for the European Commission, Pia Ahrenkilde Hansen, said the EC, Russia and Ukraine continue consultations to reach an agreement on gas supplies to Ukraine.

The consultations are in full swing and the sides are showing that the agreement is possible, she said, refusing to give further details.

Another source, close to talks, said The European Commission is preparing a financial package to pay part of Ukraine’s debt before Gazprom and finance further purchases on the prepayment condition.

The Wall Street Journal said earlier the European Commission could give Ukraine a maximum $1 billion to help Kiev pay its bills.

Russia's position

Russian Energy Minister Alexander Novak said before leaving Brussels: “If there is money, there will be gas.”

“As we have been given no written guarantees today, the risks on whether we will have money or not are leveled off by the prepayment regime,” he said.

The minister said however “there is a possibility that today final agreements will be signed while the guarantees are being agreed on.”

The European Union is ready to provide guarantees that Ukraine will pay for 4 billion cubic meters of gas, Novak said. He said this fact should be mentioned in one of the protocols.

“The European Commission fully agrees with Russia’s position,” Novak said.

Alexei Miller, the CEO of Russia’s gas giant Gazprom, said three documents had been prepared for signing at the tripartite gas talks between Russia, Ukraine and the European Union.

These documents are two protocols: a protocol in a trilateral format between Russia, Ukraine and the European Commission and a bilateral protocol between the European Commission and Ukraine.

“Everything concerning financial issues, concerning guarantees the European Commission is to issue to Ukraine, these liabilities will be committed to paper in a bilateral protocol,” he said. “As for out trilateral protocol, all principal provisions of this trilateral document have been agreed. A technical supplement to the contract between Gazprom and Naftogaz has also been agreed.

Ukraine's position

Ukraine is ready to buy natural gas from Russia on a prepayment basis, Ukrainian Prime Minister Arseny Yatsenyuk said at a government meeting on Thursday.

“We have now come to the point where the price will be determined by the contract formula and the oil price affects this formula, which means that by the end of this quarter the price will be $378 for 1,000 cubic metres of gas and by the early 2015 - $365,” Yatsenyuk said.

He also said that the final decision on the Russian gas price and supply conditions would be made by the Stockholm Arbitration Court, so “the protocol with Russia is temporary - for six months.”

He added that Kiev was ready to pay $268 per 1,000 cubic metres for previously supplied gas.

“We are ready to pay $26o for the already supplied gas,” he said. He added Kiev had funds for that in the amount of $3.1 billion.

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
“We will pay $1.450 billion right after the signing of the trilateral protocol between Ukraine, Russia and the EU, and $1.650 billion more by the end of the year,” the prime minister said.

According to him, “Ukraine is now surviving solely thanks to the gas reverse supplies from Europe.”

“We have maximally increased gas reverse from Slovakia - it’s only thanks to the reverse supplies that the country survives and gets heating,” he said, adding that 17 billion cubic metres of gas are stored in the country’s gas storage facilities, and “an additional 5 billion cubic metres are needed for the heating season and winter period.”

Yatsenyuk also said that Ukraine was ready to sign the gas protocol with Russia only trilaterally. “Our stance is that the protocol will be signed only on a trilateral level, with Ukraine and the European Union on one hand, and Russia on the other hand,” he said. The European Union “will act as guarantor of the price for the Russian gas in Ukraine, including through the compensation mechanism,” Yatsenyuk said.

Yatsenyuk said that under the new protocol conditions, “further gas supplies will be made by Russia on a prepayment basis in the volumes determined by Ukraine.

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