Saturday, April 12, 2014

Ukraine to Gazprom: We won’t accept new gas prices and are suspending payments

The newly-appointed head of Ukraine’s national gas company says the country “sees no reason” to comply with the “political” hike in gas prices imposed by Russia, and will formally stop transferring money to Moscow until the situation is resolved.
In the aftermath of the toppling of Viktor Yanukovich and the secession of Crimea from Ukraine, Russia has raised from $268 to $485 per 1,000 cubic meters, starting from this month.

35 year-old Andrey Kobolev, who was appointed to head Naftogaz Ukraine, the state importer, by the government in Kiev, told ZN.UA news portal that his company is prepared to pay only the old prices.

“We believe the new price does not reflect market value, is unjustified and unacceptable. We are stopping all transfers for the duration of negotiations. We are hoping that economics will triumph over politics, as even a company of Gazprom’s size would suffer if it were to lose one of the biggest gas markets on the continent,” said Kobolev, who assumed his post a fortnight ago. 

Ukraine says that the new price is the highest in Europe for any Gazprom customer country (Gazprom does not reveal its contract prices, but the average around the EU is $370).

Russia’s state-owned gas monopolist says the new rate reflects the cancellation of earlier discounts, and no longer includes payments for hosting Russia’s Black Sea Fleet, since Sevastopol, where it is stationed, is no longer a part of Ukraine.

Ukraine, which receives about half of its gas from Russia, has already accumulated more than $2.2 billion in debt over gas payments, even before the higher price kicked in, but Kobolev said that “any issue of repayment can be resolved only as a package deal with pricing problem”. 

  • Ukraine has also threatened to take Gazprom to the international arbitration court in Stockholm over the hike. 

Kobolev also stated that there is a “high threat” of disruptions to Gazprom’s energy supply, similar to those that left much of Eastern Europe without heating in January 2008, while Kiev and Moscow thrashed out a deal.

The Russian giant supplies about a third of Europe’s gas needs, and 40 percent of that gas passes through Ukraine.

On, Friday Vladimir Putin warned that Russia does not wish to “unilaterally carry the burden" of supplying Ukraine if it refuses to accept prices, though later reassured worried Europeans that Moscow has no intention of cutting off supplies for the time being.

One idea that has been mooted by Ukraine and its westward allies, is re-pumping of Gazprom’s cheaper gas supplied to other countries back into Ukraine.

This flow reversal could either be done physically – by re-engineering the pipes – or virtually, by Ukraine holding onto some of the other countries’ gas as it passes through theirs. While the first solution presents technical difficulties, both are liable to be treated as a breach of contract by Gazprom, which forbids countries from reselling its supplies under specific circumstances.

So far, Hungary and Poland have said they are ready to channel gas into Ukraine, while Slovakia is awaiting the go-ahead from Moscow.

In any case, further clarification on the issue is unlikely to happen before a mooted four-way meeting between Russia, Ukraine, the EU and the US later this month.

1 comment:

  1. Naftogaz of Ukraine CEO offers two solutions to gas problem with Russia...

    Naftogaz of Ukraine CEO Andrei Kobolev said there were two ways to solve the gas problem for Ukraine.

    One is to make a deal with Russia’s Gazprom and keep the previous price. The other one is to reach an agreement with European companies so that they buy gas from Gazprom and then sell it to Ukraine and make direct payments for gas transit across Ukraine, Kobolev told the Ukrainian newspaper ZN.UA on Saturday, April 12.

    He said Ukraine had already proposed that the European Commission and major European companies begin negotiations with Gazprom to discuss the terms of buying gas on Russia’s western border for pumping into Ukrainian underground gas storage facilities and transporting to Europe.

    Kobolev said Ukraine continued gas price negotiations with Gazprom. “In accordance with the terms of the contract we sent an official proposal to preserve the present price of 268.5 U.S. dollars per 1,000 cubic metres. We have not received any answer so far,” he said.

    Ukraine “sees no market factors” for raising the price and the new price of Russian gas “which is close to 500 U.S. dollars” is “non-market, unjustified and unacceptable”, he said.

    “We have suspended settlements for the duration of the gas price talks,” Kobolev said, adding that the debt for the gas purchased earlier stood at 2.2 billion U.S. dollars as of April 1.

    Ukraine is ready to buy Russian natural gas at a price of 268 U.S. dollars per 1,000 cubic metres, parliament-appointed Prime Minister Arseny Yatsenyuk said.

    He said Ukraine “does not accept” Russia’s decision to raise the price of gas from April 1 and regards it as “political pressure”.

    “Political pressure will not pass. We do not accept the price of 500 U.S. dollars. Ukraine is ready to continue buying natural gas at the price that was in effect since the beginning of the year - 268 U.S. dollars. This is an acceptable and balanced price,” Yatsenyuk said.

    He reiterated Kiev’s readiness to “make all payments for the previous gas supplies” and was waiting for Russia’s reply.

    Yatsenyuk stressed that the Russian gas price hike would have a negative impact on industrial enterprises and the population. “The price rise to 500 U.S. dollars will mean a blow to chemical enterprises, metallurgical enterprises and people,” he said.

    He said Kiev “will use in relations with the Russian monopoly Gazprom all methods to settle the situation, including international law”....................


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