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Ukraine may go to court to revise gas debt to Gazprom

May 08, 2014, 23:59 UTC+3 KIEV
Energy and Coal Industry Minister Yuri Prodan stressed that Ukraine could not buy Russian gas at a price of 485.5 U.S. dollars per 1,000 cubic metres and would seek to revise this price
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© EPA/RADEK PIETRUSZKA

KIEV, May 08. /ITAR-TASS/. Ukraine may go to a court of arbitration in order to revise the gas debt to Russia’s Gazprom which was made not only in 2014 but also in 2013, acting Energy and Coal Industry Minister Yuri Prodan said on Thursday, May 8.

“The pre-arbitration process is on,” he said, adding that the debt could also be reduced by a court ruling if Kiev initiates legal action.

Prodan stressed that Ukraine could not buy Russian gas at a price of 485.5 U.S. dollars per 1,000 cubic metres and would seek to revise this price.

He reiterated parliament-appointed Prime Minister Arseny Yatsenyuk’s position that Kiev was prepared to pay the debts within ten days after Naftogaz of Ukraine and Gazprom agree to reduce the price of gas for Ukraine to 268.5 U.S. dollars per 1,000 cubic metres.

This is 45% below the established price of gas. If Moscow disagrees, Kiev will be prepared to contest its debt in court, Yatsenyuk said.

He told reporters that a “note” had been sent to Russia’s Gazprom, which “states the price”. If Gazprom accepts the proposed terms, Ukraine will pay the gas debt of 2.2 billion U.S. dollars immediately. If no solution is found within 30 days, the dispute will be taken to court.

“We have come to agreement on a trilateral meeting between Ukraine, the EU and Russia to settle the gas conflict. But I would like to recall that Ukraine has sent a pre-arbitration claim to Gazprom. If the positions are not reconciled and Ukraine’s demands are not met within 29 days, we will meet in Stockholm’s international court of arbitration,” he said.

“The government invites Gazprom to meet on neutral ground in London and discuss all issues. We will defend the interests of Ukraine using all lawful methods and the best lawful method is the court in Stockholm,” Yatsenyuk said.

On May 7, Gazprom spokesperson Sergei Kupriyanov said Ukraine had so far not paid the gas debt. “The deadline for payments for April has passed. Nothing was paid. Ukraine’s overdue debt for the Russian gas has increased to 3.508 billion U.S. dollars,” he said.

Now that the debt has not been paid, Gazprom will start supplying gas to Ukraine against advance payments from June.

Russian Energy Minister Alexander Novak said this was not a restriction but an option stipulated by the contract between Gazprom and Naftogaz of Ukraine. “If no payment for the gas supplied is made on May 7, Gazprom on May 16 will issue a preliminary bill for the supply of gas in June. Ukraine will have an opportunity to pay this bill by May 31, in which case the amount of gas to be supplied in June under the advance payment will not exceed the volume paid for until May 31,” Novak said.

Under the contract between Naftogaz of Ukraine and Gazprom, the price of gas supplied to Ukraine is determined by the formula that is pegged to the price of oil. “This formula is used everywhere in the world for pipeline gas supplies. Therefore there are no grounds to discuss the price today and especially unilaterally offer the first quarter price of 268 U.S. dollars per 1,000 cubic metres as the Ukrainian authorities are doing,” Russian Energy Minister Alexander Novak said.

Parliament-appointed acting President Alexander Turchinov on May 1 instructed the Ministry of Energy and Coal Industry to secure gas supplies from Russia at the price that was in effect in February and March 2014.

Russia abolished the zero duty on gas for Ukraine on April 3, which automatically raised the price of gas for Ukraine from April 2014 to 485 U.S. dollars per 1,000 cubic metres, an increase of more than 200 U.S. dollars from the price that was used until then.

In December 2013, Russian Gazprom and Naftogaz Ukrainy signed an addendum to the gas agreement in effect from January 19, 2009, under which the price of Russian natural gas for Ukraine was to be reduced by one-third to 268.5 U.S. dollars per 1,000 cubic metres from January 1, 2014, compared to 410 U.S. dollars per 1,000 cubic metres in the fourth quarter of 2013.

Moscow and Kiev also agreed that the discount would remain in effect as long as the key conditions were met, specifically timely payments for current supplies and repayment of debts.

At the end of the first quarter of 2014, Gazprom said it would have to raise the price of gas for Ukraine by more than 100 U.S. dollars to 385.5 U.S. dollars per 1,000 cubic metres because Ukraine had failed to pay the debt for the gas delivered in 2013 and had not made payments for current supplies.

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