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Gazprom delays prepayment gas supply regime for Ukraine until June 16

This said Gazprom CEO Alexei Miller following his talks with European Commissioner for Energy Guenther Oettinger

BRUSSELS, June 11, 5:02 /ITAR-TASS/. Russian energy giant Gazprom decided to postpone until June 16 an introduction of the prepayment regime for the natural gas supplies to Ukraine, Gazprom CEO Alexei Miller said on Wednesday.

“Bilateral consultations between the European Commission and the Russian delegation were held today in Brussels,” Miller said following his talks with European Commissioner for Energy Guenther Oettinger.

“The Russian side made an advance to maintain constructive negotiations,” he said. “The prepayment regime will not be activated at 10:00 a.m. Moscow time on Wednesday and its introduction has been moved for the next Monday at 10:00 a.m.”

Besides Miller, the bilateral consultations with Oettinger in Brussles also involved Russian Eenergy Minister Alexander Novak. The talks lasted for nearly two and a half hours.

The issue of Ukraine’s natural gas debt to Russia was also in the focus of President Vladimir Putin’s telephone conversation with German Chancellor Angela Merkel late on Tuesday night.

“Putin stressed that despite the emerged difficulties the Russian delegation obliges to continue the talks basing on the constructive stance and with the aim of achieving a mutually beneficial agreement,” the Kremlin said commenting on the results of the telephone conversation.

Russia, Ukraine and the European Union met on late Monday in Brussels for the fifth round of the three-party gas talks, which lasted for almost eight hours and ended on early Tuesday with the participating sides failing to reach a final agreement. The participants decided to continue the negotiations on late Tuesday.

However, Oettinger’s spokeswoman Sabine Berger later said that the talks were rescheduled for Wednesday morning at 9:30 local time (7:30 GMT) as the Russian delegates had to fly to Moscow to coordinate their positions with President Putin and returned to Brussels late on Tuesday night.

Following the trilateral talks on Tuesday, Novak said that the Russian gas price for Ukraine for June, July and August was for the first time discussed at the negotiations.

Kiev has already repaid part of its gas debt to Moscow following previous rounds of gas talks. Novak confirmed Moscow’s position that Ukraine should repay the gas debt for November-December 2013 to the tune of $1.451 billion (as of June 2) and $500 million for April-May 2014 by June 10.

Ukrainian parliament-appointed Energy and Coal Industry Minister Yury Prodan said in turn that Russian state energy giant Gazprom offered Ukraine a discount on gas through reduction of duties. Prodan said no new achievements have been reached at the talks since June 2.

He added that Gazprom was ready to lower the gas price for Ukraine to $385 per 1,000 cubic meters while the export duty totaled some $100.

After Crimea’s merger with Russia, the price for 1,000 cubic meters of gas for Ukraine exceeded $485. Oettinger earlier said a fair price for Ukraine would be in the range of $350-$380 per 1,000 cu m. Official Kiev still insists on the return to an earlier price of $268.5 per 1,000 cu m.

The undisputable part of Ukraine’s debt for November-December 2013 stood at $1.454 billion as of Monday, June 9. Moscow is waiting for the debt to be repaid. However, Prodan reiterated Kiev’s position that the debt repayment would start only when a price acceptable for Ukraine was approved.

Gazprom CEO Alexey Miller said on June 2 that Gazprom was ready to cut its gas price for Ukrainian state energy company Naftogaz Ukrainy even beyond the limits of export duties.

Miller told journalists that should the Ukrainian gas debt be repaid, the Russian side would be ready to consider the price issue resolution scheme “not only through reduction of the export customs duty but also through direct commercial talks on a corporate basis.”

Moscow recently substantially raised the price for gas supplied to Ukraine from the figure of $268.5 per 1,000 cubic meters agreed last year when an association agreement with the European Union was shelved in November 2013.

In the second quarter of 2014, the price for Russian gas for Ukraine was set at $385.5 per 1,000 cu m. Gazprom said earlier that the price rose from $268.5 due to the return to earlier contract agreements, as Ukraine failed to fulfill its commitments under an additional agreement concluded in December 2013, which obliged the country to pay for the supplied volumes of Russian gas on time.

On April 2, Russian President Vladimir Putin signed a law on denunciation of the Kharkov Accords with Ukraine, which were struck in 2010 and stipulated that Russia’s lease of naval facilities in Crimea [then part of Ukraine] would be extended by 25 years beyond 2017 - until 2042.

The Kharkov deals envisioned a discount of $100 per 1,000 cubic meters on Russian gas for Kiev. Now that the accords have been denounced due to Crimea’s merger with Russia, the discount is no longer applied, raising the gas price by another $100 to $485.5 per 1,000 cubic meters.

Ukraine hopes to annually obtain about 10 billion cubic meters of gas through gas reverse supply schemes from Slovakia, Poland and Hungary. This way Ukraine can only supplement for one third of its Russian gas imports.