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Interim gas deal stipulates no deadline for Ukraine to repay remaining gas debt

October 31, 2014, 11:12 UTC+3
A corresponding decision will be made by the Stockholm Arbitration Tribunal, Gazprom CEO Alexey Miller said
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Gazprom CEO Alexey Miller

Gazprom CEO Alexey Miller

© EPA/BERND VON JUTRCZENKA

MOSCOW, October 31. /TASS/. The deadline for Ukraine to repay the remaining gas debt is not stipulated in an interim deal reached between Moscow and Kiev, Gazprom CEO Alexey Miller said on Friday.

A corresponding decision will be made by the Stockholm Arbitration Tribunal, Miller told Rossiya-24 TV Channel.

Russian natural gas deliveries to Ukraine will resume 48 hours after Kiev repays the first $1.45 billion portion of its gas debt and makes an advance payment, Miller said. “Two days after the terms of the agreement signed on October 30 are fulfilled, the deliveries will be resumed,” the Gazprom CEO said.

Ukraine does not rule out a possibility of increasing natural gas purchases by the end of the year above the volume of 4 billion cubic meters stipulated in the “winter package,” Miller said. The Ukrainian side mentioned the volume of up to 7 billion cubic meters of natural gas on the sidelines of the gas talks, the Gazprom head said.

Determining gas price for Ukraine in 2015

The Russian government may sign a resolution on a $100 gas price discount for Ukraine on Friday, Miller said. “We expect that the resolution may be signed already on October 31,” Miller told Rossiya-24 TV Channel.

The situation on the market will determine the gas price for Ukraine in the first quarter of the year 2015, Miller told reporters earlier.

“(The signed documents) offer a clear mechanism of prepayment and outline many technical aspects. Though the prepayment mechanism complies with the current contract, those purely settlement issues regarding invoices or terms have not been detailed fully, which is done in the document signed today (on Friday). The work on gas supplies to Ukraine will continue strictly in compliance with the current contract of 2009. First of all, regarding the mechanism of pricing. The price for gas supplies to Ukraine is the price formula minus a $100 discount under the government’s decision… the current price for the fourth quarter is $378.22 per 1,000 cubic metres. As for the price for the first quarter, now we may speak only about some forecasts, as the price formula is based on a nine-month period, which reflects indexation of oil products and, of course, the final price for the first quarter will depend on market prices on hydrocarbons next months,” he said.

“The main issue of the past months’ talks is Ukraine’s ability to pay. In fact, there has not been any other issue. Over this period the concern was where and how much Ukraine may borrow,” he said.

“Under the agreements reached and under the signed documents, Ukraine is obliged to settle $3.1 billion before the yearend. The first step towards resuming our supplies to Ukraine is the $1.45 million, which we should see in our account,” Gazprom’s head said.

Miller said Ukraine planned to buy 2 billion cubic metres of gas in November and 2 billion cubic metres of gas in December.

Earlier, the Russian Energy Ministry has not excluded a possibility of reducing the gas price for Ukraine to $365 for 1,000 cubic meters.

Ukraine guarantees debt repayment but sources of financing unclear

The sources of financing for the Ukrainian national energy company Naftogaz to repay debts for Russian natural gas supplies have not been finally defined but Ukraine guarantees debt repayment, Gazprom CEO Alexey Miller said.

“It is uneasy to answer the question about the sources of financing for Ukraine to repay its debt for the supplied gas,” Miller told Rossiya-24 TV Channel

The Gazprom head added, however, that “Ukraine has assumed guarantees and put its signature below the documents that were guaranteed by the European Commission’s signature.”

Russia, Ukraine and the EU agreed four basic sources of financing for Ukraine to repay its gas debt, outgoing EU Energy Commissioner Guenther Oettinger said after the three-party gas talks in Brussels on October 30.

First of all, this is the IMF’s current financial aid program for Ukraine. The IMF will provide funds to cover Ukraine’s general needs and they can be used to pay gas bills, Oettinger said. The EU is also discussing a possibility jointly with the IMF to open a new credit line for Ukraine in 2015, he added.

Secondly, a special fund can be established to accumulate $3.1 billion for Ukraine’s debt repayment to Gazprom, the EU energy envoy said.

Thirdly, Naftogaz is a commercial company and it will use its revenues for gas settlements, Oettinger said.

Fourthly, the EU will continue disbursing funds to Ukraine as part of the EU’s assistance program, he said.

Russia and Ukraine reached an interim gas agreement with the EU’s mediation in Brussels on October 30. The deal worth $4.6 billion is the basis for secure energy supplies to Europe in the upcoming winter, the EU energy commissioner said after the gas talks.

Under the deal, the Ukrainian national energy company Naftogaz will pay $1.4 billion to Gazprom as partial repayment for the natural gas supplied to Ukraine in November-December 2013 and early 2014. The deal allows Ukraine to purchase natural gas until late March 2015 at a fixed price of $385 per 1,000 cu m, which will cover Ukraine’s requirements for natural gas and ensure stable supplies to Europe.

Ukraine will have to repay another $1.65 billion to Gazprom by the end of this year. Russia will supply natural gas to Ukraine, if Kiev makes advance payments.

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