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

April 12, 21:23 UTC+4 KIEV
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KIEV, April 12, /ITAR-TASS/. 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”.

Yatsenyuk said Ukraine should get prepared for cuts in gas supplies from Russia. “We understand that the next step will be the limitation of natural gas supplies from Russia,” he said.

He instructed Energy and Coal Industry Minister Yuri Prodan to “prepare two scenarios” one of which would envision “supply cuts from Russia”.

Prodan said Ukraine might go to the Stockholm arbitration court to revise the price of Russian gas if the talks with Gazprom failed to produce a solution. “If we do not come to agreement, the procedure is provided for in the contract [of 2009] - taking the case to the Stockholm arbitration court,” the minister said.

He believes that Kiev still has time for talks with Moscow.

Prodan said the price of 485.5 U.S. dollars per 1,000 cubic metres of Russian gas was too high a price. “This is an exorbitantly high price and Russia should understand that there are no other such [price] analogues,” he told a news conference in Kiev.

The minister said it would be less costly for Ukraine to import gas from Europe.

Speaking about the price for the transit of Russian gas through Ukraine to Europe, Prodan said. “It’s subject to negotiation.”

He said Ukraine would like to go back to the agreement with Russia reached in late 2013, which allowed Kiev to buy Russian gas at a price of 268.5 U.S. dollars per 1,000 cubic metres and get a 15 billion U.S. dollar loan from Russia.

“We have to begin negotiations in order to go back to that price. This is probably the price that ensured stable work of our gas transportation system,” the minister said.

The agreement envisaged the disbursement of two billion U.S. dollars to Ukraine in 2014, which Kiev would automatically have used to pay the debt for Russian gas, which Prodan estimated at about two billion U.S. dollars.

Russia abolished the zero export duty on gas for Ukraine on April 3, which automatically raised the price of gas for Ukraine from April 2014 to 485 U.S. dollars per 1,000 cubic metres, an increase of more than 200 U.S. dollars from the price that was used until now.

In December 2013, Russian Gazprom and Naftogaz Ukrainy signed an addendum to the gas agreement in effect from January 19, 2009, under which the price of Russian natural gas for Ukraine was to be reduced by one-third to 268.5 U.S. dollars per 1,000 cubic metres from January 1, 2014, compared to 410 U.S. dollars per 1,000 cubic metres in the fourth quarter of 2013.

Moscow and Kiev also agreed that the discount would remain in effect as long as the key conditions were met, specifically timely payments for current supplies and repayment of debts.

At the end of the first quarter of 2014, Gazprom said it would have to raise the price of gas for Ukraine by more than 100 U.S. dollars to 385.5 U.S. dollars per 1,000 cubic metres because Ukraine had failed to pay the debt for the gas delivered in 2013 and had not made payments for current supplies.

In March, Russia supplied 1,956 million cubic metres of gas to Ukraine and “has not received a kopeck” for it so far. “The debt has increased and exceeded 2.2 billion U.S. dollars. The situation is not improving. It is actually getting worse,” Miller said.

Gazprom CEO Alexei Miller said that “the debt situation cannot continue endlessly. We cannot supply gas for free. The debt must be paid. And current deliveries must be paid in full, too.

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