Ukraine-Russia Nat Gas Talks end without deal: Bloomberg 6/12/14

Ukraine Rejects Russian Offer as Gas Talks End Without Deal (1)


By Ewa Krukowska, Elena Mazneva and Volodymyr Verbyany

June 11 (Bloomberg) — Ukraine rejected a Russian proposal

for the price of future natural-gas deliveries as European

Union-brokered talks in Brussels ended without an agreement.

Russia offered to supply gas for about 20 percent below the

current price, a level Ukraine said was still more than it’s

willing to pay, EU Energy Commissioner Guenther Oettinger said

at a press conference after the three-way meeting. Russia’s

energy minister said the country also wants $1.95 billion for

past fuel supplies before June 16 or it may cut shipments.

“In the next 48 hours we’ll try to make progress, not

waste time,” Oettinger said. “Monday is quite a way off so

there’s still a good opportunity.”

The EU, dependent on Russian gas piped through Ukraine for

about 15 percent of its supplies, is trying to broker a deal to

maintain shipments amid a dispute over payments for the fuel. In

Ukraine, government forces and rebels claiming allegiance to

Russia continue to clash in the east of the country.

Oettinger is optimistic an agreement can be reached to end

the gas price dispute in the next few days, he said at the press


‘Package Deal’


Russia proposed a “compromise” package, supplying Ukraine

with fuel for $385 per 1,000 cubic meters, $100 below the

current price, Novak said. That discount is similar to what

Russia granted Ukraine from 2010 until April this year, he said.

Russia may guarantee the discount from April through the

next 12 months, if Ukraine is ready to settle its debts,

according to Novak.

Ukraine should first pay $1.45 billion for the last two

months of 2013 and an additional $500 million as part of the

debt for gas received in April and May, Novak said. If there is

no payment by the morning of June 16, Ukraine will only get fuel

it pays for upfront, at the current price, he said.

The next step would be settling the rest of the debt for

April and May, which would total $2.35 billion at the new price,

according to Novak.

“Within a year we are ready to provide adequate safeguards

or to sign the necessary documents,” Novak said.


‘Fair Price’


In response, Ukraine’s energy minister Yuri Prodan said his

country is ready to pay once Russia sets a “fair” market-based

price. The proposed government discount may be canceled at any

time, he said. Russia has done it once before, Ukrainian Prime

Minister Arseniy Yatsenyuk said in Kiev today before the talks.

“We know Russian tricks,” Yatsenyuk said.

The state energy company NAK Naftogaz Ukrainy will file for

international arbitration in Stockholm if Russia fails to agree

on the price. Ukraine could get the gas from the EU at a

significantly lower price through a so-called reverse route,

Prodan said. If Russia cuts the supplies, “Ukraine will employ

maximum possible reverse and wait for the decision of the

Stockholm arbitration,” he said.


‘Dead End’


Ukraine refused to pay after Russia raised the gas price by

81 percent in April. Supplier OAO Gazprom rescinded a price

discount granted in December because of Ukraine’s mounting

debts, while Russia stripped its neighbor of a 2010 export-duty

break that it exchanged for a lease on its Black Sea fleet’s

port in Crimea, which Russian President Vladimir Putin annexed

in March.

“If our offers are rejected, events will reach a

completely different stage,” Putin said today in Moscow minutes

before the talks in Brussels ended.

If Ukraine wants guarantees that Russia won’t cancel the

new discount, the government in Moscow should consider the

issue. But if the smaller country finds the discount too low and

wants more, “then this whole affair looks to be deliberately

heading for a dead end,” Putin said.


Summer Time


There’s no guarantee there will be an agreement in coming

days, because the arrival of summer takes the pressure off, said

Ekaterina Rodina, an oil and gas analyst at VTB Bank in Moscow.

Russia has shown it’s ready to negotiate by suggesting

discounts and debt-repayment extensions, while Europe and

Ukraine have managed to build significant gas stock in

underground storage, Rodina said.

“When all are comfortable and there is no pressing issue –

– the freezing weather — negotiations could be extended until


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