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EU, IMF to finance most part of expenses on Ukraine-EU-Russia gas deal - Naftogaz

November 01, 2014, 2:02 UTC+3 KIEV
Asked what benefits Ukraine obtained from the new deal, the head of Ukraine’s national oil and gas company said the agreement is “a breakthrough”
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© ITAR-TASS/Zurab Dzhavachdze

KIEV, October 31. /TASS/. The European Union and the International Monetary Fund (IMF) will “finance the most part” of expenses connected with implementation of the three-party gas deal involving Russia, Ukraine and the EU on supplies of Russian natural gas to Ukraine in the upcoming winter, the head of Ukraine’s national oil and gas company Naftogaz said Friday.

“The EU and IMF will finance most of the agreement,” Andrey Kobolev told the 1+1 Ukrainian TV channel in an interview.

At their latest two-day gas talks on October 29-30, Russia, the EU and Ukraine agreed on resumption of Russian gas supplies to Ukrainian consumers, on guarantees of gas transit to the EU and partial repayment of Kiev’s gas debts.

Asked what benefits Ukraine obtained from the new deal, Andrey Kobolev said the agreement is “a breakthrough.”

“(Our) victory is that there are guarantees of natural gas deliveries,” he stressed.

“The final price for gas will be determined by the Stockholm arbitration court. After that, it will be clear who owes whom and how much,” Kobolev said, apparently referring to a lawsuit filed by Naftogaz to the arbitration court regarding the price for Russian gas.

“The EU posed as an intermediary in that agreement,” he said. “We will get as much gas as we need.”

Russian state-controlled energy giant Gazprom on June 16 switched Naftogaz to prepayment for gas supplies because Kiev failed to pay part of its gas debt by the deadline of 10:00 Moscow Time on June 16.

Russian gas supplies to Ukraine for its own needs were halted, but transit volumes were reportedly passing via Ukraine to Europe in line with the schedule.

During the latest talks, Moscow agreed to grant Kiev a discount of $100 for 1,000 cubic meters of gas to the contract formula-stipulated price. The discount will be formalized by a Russian government resolution soon, according to Russian Energy Minister Alexander Novak.

With the discount, the Russian gas price for Ukraine in the fourth quarter of 2014 will total $378 per 1,000 cu m, and $365 per 1,000 cu m in the first quarter of 2015. “This price is close to the market one,” Ukrainian Energy Minister Yury Prodan said. He said Naftogaz plans to buy 4 billion cu m of gas from Gazprom by the end of the year.

The “take or pay” regime will be canceled for Ukraine from November 2014 to the end of March 2015, Novak said, adding that the issue of gas supplies in the summer period had not been discussed at the talks.

The Russian gas supplies to Ukraine will start immediately after the first tranche is paid, Prodan said describing the reached agreements.

Gazprom’s share in European gas imports totals 60%, with half of it supplied via Ukrainian territory.

Russian President Vladimir Putin pledged October 17 that Russia will provide enough gas to Europe in winter.

In late 2008 - early 2009, a gas dispute between Moscow and Kiev saw Russia cut off gas supplies to Ukraine on January 1, 2009 over unpaid debts.

Gas deliveries to European consumers were affected because Ukraine apparently started siphoning off transited gas. The dispute was resolved on January 18, 2009 with a new gas contract.

Ukraine to reduce share of Russian gas in its import to 25%

The share of Russian gas in Ukraine’s gas imports will not exceed 25%, Naftogaz CEO Andrei Kobolev said on Friday.

“The agreement that was reached in Brussels is intermediate,” he told the Shuster LIVE television programme. “Under this agreement, Ukraine will pay for gas it bought last year at a minimal price, which will be revised at the Stockholm court of arbitration. The agreement imposes no limits on gas volumes. We can buy as much as we need.”

At the same time, he said, Ukraine ”must look for other options of gas procurements, apart from Russia.” “So far, Russia’s gas is dominating,” he said, adding that in the coming winter Ukraine would try to “minimize” the use of Russian energy resources.

As for the Ukraine-EU-Russia agreement on gas supplies to Ukraine, the Naftogaz CEO said it was a ”certain progress.” “It will make it possible to settle the situation in the country’s gas sphere,” he stressed.

He said Ukraine had ultimately won the gas dispute with Russia. “The final victory will come when we minimize consumption of Russian gas,” he noted.

Earlier on Friday, Kobolev told the 1+1 television channel that Naftogaz and Gazprom would begin negotiating the gas price in the summer period in the coming spring and the “winter” price - in the summer. “We are planning talks on the “summer” price in the spring of the coming year, and the “winter” price will changed in the summer,” Kobolev said. “The current price is not merely temporary, it is intermediate. The Stockholm court of arbitration will revise it.”

He reminded that agreements on terms of Russian gas supplies to Ukraine that had been reached on October 30 in Brussels were applicable to the period from November 2014 to March 31, 2015. Bearing in mind that a ruling of the Stockholm court of arbitration can be expected by the end of 2015, the sides will have to meet for another round of negotiations in the spring.

According to earlier reports, Russia will sell its gas to Ukraine in the fourth quarter of 2014 at a price of about 378 U.S. dollars per 1,000 cubic metres of gas, and at a price of 365 U.S. dollars per 1,000 cubic metres in the first quarter of 2015. The price will be calculated under the current contract formula with a 100 U.S. dollar discount.

In November-December 2014, Ukraine plans to buy four billion cubic metres of Russian gas to a sum of 1.512 billion U.S. dollars. Before the end of December 2014, Ukraine is to transfer to Gazprom 1.45 billion U.S. dollars it owes for the gas supplied in November-December 2013, and another sum of 1.65 billion U.S. dollars for gas supplies in April-June 2014.

Ukraine to reduce share of Russian gas in its import to 25%

Ukraine’s Naftogaz and Russia’s Gazprom will begin negotiating the gas price in the summer period in the coming spring and the “winter” price - in the summer, Kobolev said on Friday.

“We are planning talks on the “summer” price in the spring of the coming year, and the “winter” price will changed in the summer,” Kobolev told the 1+1 television channel. “The current price is not merely temporary, it is intermediate. The Stockholm court of arbitration will revise it.”

He reminded that agreements on terms of Russian gas supplies to Ukraine that had been reached on October 30 in Brussels were applicable to the period from November 2014 to March 31, 2015. Bearing in mind that a ruling of the Stockholm court of arbitration can be expected by the end of 2015, the sides will have to meet for another round of negotiations in the spring.

 

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