Ukraine Faces Russian Gas Cutoff as Payment Talks Fail
Ukraine risks the cutoff of natural-gas supplies from Russia after overnight talks to resolve a
pricing dispute between the two countries ended without a deal
less than eight hours before a payment deadline.
Ukraine must pay $1.95 billion to partially settle its debt
to the Russian-owned natural gas exporter OAO Gazprom for past
deliveries by 10 a.m. Moscow time today, said Sergei Kupriyanov,
a company spokesman, by phone. He said the deadline won’t be
waived.
“The Russian side has stated that if there will be no
upfront payment, it will start limiting gas,” said Ukraine
Energy Minister Yuri Prodan.
Russian negotiators rejected a compromise proposal by the
European Union, according to EU Energy Commissioner Guenther Oettinger, who has been involved in the trilateral talks since
they started in May.
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 the fuel payments conflict. In Ukraine,
government forces and rebels claiming allegiance to Russia
continue to clash in the east of the country.
“For the moment our Russian partners didn’t accept my
proposal,” Oettinger said. “We have no common understanding.”
Under the EU’s last offer, Oettinger said, Ukraine would
pay its debt in installments, with $1 billion paid immediately
and the rest by the year-end.
Even after the talks concluded, Andriy Kobolyev, chief
executive officer of the country’s national energy company, NAK
Naftogaz Ukrainy, said he hopes the Russians might still accept
the EU offer and waive the deadline.
Previous Deadline
Gazprom had previously extended the payment deadline for
Ukraine after receiving $786 million for supplies delivered in
February and March. Ukraine refused to pay the rest of its debt
demanding market-based prices, which it says would be lower than
Gazprom proposed.
In April, after Ukraine’s Kremlin-backed President Viktor Yanukovych was ousted in street protests, Russia rescinded a gas
discount it had previously granted Ukraine. Russian President
Vladimir Putin also stripped the Ukraine of a 2010 export-duty
reduction that it exchanged for a lease on its Black Sea fleet’s
port in Crimea, which Russia annexed in March.
Ukraine was ready to accept the EU proposal of a price
range between $300 and $385 per 1,000 cubic meters, still above
the $286.5 that the country paid in the first quarter, Kobolyev
said today. Gazprom’s final offer was $385, the company said
last week.
Preparations Ordered
Ukrainian Prime Minister Arseniy Yatsenyuk on June 13
ordered the nation’s authorities to prepare for the planned cut-off.
Ukraine, which relies on Gazprom (GAZP) for about half its gas, is
able to survive without Russian fuel until the middle of
September as its current gas consumption almost matches domestic
output due to low seasonal demand and the stalling of production
at its chemical plants in the east, according to a Concorde
Capital, a Kyiv, Ukraine-based investment company.
The European Commission, the 28-nations EU’s executive arm,
said in a statement today that it aims to help broker an
agreement that secures supplies from Russia.
“As the commission is convinced that a solution is still
possible and in the interest of all parties concerned, it will
reflect on the next steps and on when to bring the parties
together again,” the EU said in the statement.
To contact the reporters on this story:
Elena Mazneva in Moscow at
emazneva@bloomberg.net;
Volodymyr Verbyany in Kyiv at
vverbyany1@bloomberg.net;
Ewa Krukowska in Brussels at
ekrukowska@bloomberg.net
To contact the editors responsible for this story:
Lars Paulsson at
lpaulsson@bloomberg.net
Anthony Gnoffo