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29 May, 2014 14:34

Ukraine's final gas plea: Lower prices, then we pay debt

Ukraine's final gas plea: Lower prices, then we pay debt

Friday is Kiev’s last change to transfer $2 billion to Gazprom or risk a "gas war" with Moscow and a halt to gas deliveries not only to Ukraine but Europe. European customers get about 50 percent of Russian gas via Ukraine.

By June 7, Ukraine’s total debt for supplied gas will be $5.2 billion if it continues to avoid payments, state-owned Gazprom CEO Aleksey Miller said Wednesday in a meeting with Russian President Vladimir Putin and other government advisers.

" There is not much time left. The next consultations are scheduled for Friday in Berlin. Mr. Novak [Russia's Energy Minister] and I will take part in these trilateral talks with the European Commission and the heads of Ukraine’s energy sector and Naftogaz Ukraina," said Miller.

Earlier on Thursday, Prime Minster Arseniy Yatsenyuk said Ukraine will either agree on a lower price that “reflects market conditions” or continue moving forward with the lawsuit against Gazprom at the International Court of Arbitration in Stockholm.

“If we agree in this issue, we will pay all of our debts in the course the next ten days,” Yatsenyuk said in an interview with the German newspaper Bild, published Thursday.

In May Ukraine used 3.5 billion cubic meters of Russian gas costing $1.7 billion, Miller said Wednesday in his meeting with President Putin.

The matter will not be discussed until tomorrow’s trilateral energy meeting between Russia, Ukraine, and the EU in Berlin, a source close to the proceedings told RIA Novosti said on Thursday.

"There will be no official information [about Ukraine's decision] today. Possibly, [the announcement will be made] after a meeting on Friday," the source said, as quoted by RIA Novosti.

Russia said it will only consider lowering the price of gas to Kiev if it begins paying off its gas debts.

Tomorrow #Ukrainian#Naftogaz must pay 2 bilion USD to #Gazprom, energybill last winter. Then Russia wants new talks. http://t.co/ay6KcokkuT

— Simon Trommel (@TrommelTweets) May 29, 2014

Following Moscow’s suggestion, the EU proposed Ukraine begin repaying its debt to Russia using some of the $3.2 billion from its first IMF loan which it received earlier this month.

The first $2 billion tranche is part of an agreement brokered by the European Commission that would help resolve the conflict. Naftogaz, Ukraine’s state oil and gas company could transfer $2 billion by May 30 and another $500 million by June 7, which will cover unpaid gas bills from November to April.

Russia’s Energy Minister Aleksandr Novak said that Russia will only move forward with talks as long as Kiev pays the first part of its debt by Friday.

On Wednesday, Ukrainian Energy Minister Yury Prodan reiterated Kiev is ready to pay Russia as long as Gazprom lowers its current rate of $485 per 1,000 cubic meters down to $268.50 per 1,000 cubic meters, a rate it enjoyed under a discount for the first three months of 2014.

"The price of Russian gas to Ukraine doubled for only one reason - Ukraine made its own choice in favor of a free state, having signed the agreement with the EU," Yatsenyuk said in an interview.

Ukraine and Naftogaz haven’t paid their gas bills in full since July 2013, Putin said at this year’s St. Petersburg Economic Forum.

Europe sources about one third of its energy supply from Russia, 50 percent of which flows through Ukraine. Any disruption will not only affect the country hosting the pipeline, but much of Europe as well.