RIA Novosti: Preview: Russia, EU, Ukraine Attempt to Resolve Gas Dispute for Third Time

MOSCOW, May 30 (RIA Novosti) – Officials from Russia, Ukraine and the EU are set to hold talks in Berlin on Friday, a third attempt to resolve the gas dispute caused by Ukraine’s $4 billion outstanding gas debt.

Russian Energy Minister Alexander Novak is also scheduled to meet with EU Energy Commissioner Gunther Oettinger on Friday.

AND SO IT BEGINS

Kiev received a $100 discount for Russian gas under a 2010 deal in exchange for extending the lease allowing Russia’s Black Sea Fleet to be stationed in Ukraine’s Crimea. However, Ukraine’s state oil and gas company Naftogaz has been accumulating debts for Russian gas supplies since November 2013.

In December 2013, Ukraine received another gas discount, effectively cutting the price to $268.50 per 1,000 cubic meters of gas.

In April 2014, Russian gas giant Gazprom canceled that discount, as crisis-hit Ukraine had failed to pay for last year’s deliveries. Following Crimea’s reunification with Russia, Moscow terminated agreements with Ukraine on the basing of the Black Sea Fleet, which included a separate discount on export duties on gas destined for the country, leading to an ultimate gas price for Ukraine of $485.50 per 1,000 cubic meters.

Ukraine’s debt for Russian gas deliveries reached $3.5 billion by late April as Kiev rejected the new price. Russia announced a switch to a prepayment scheme, in full accordance with the 2009 energy contract between Russia and Ukraine. Following the decision, an advance bill was sent to Naftogaz for June deliveries, with supplies to be suspended starting June 3 if the debt is not at least partly paid off. The cutoff could affect European supplies, as a large portion of Russian deliveries to Europe pass through Ukrainian pipelines.

On Wednesday, EU Energy Commissioner Günther Oettinger said that Ukraine’s gas debt to Russia had reached $4 billion as Gazprom had not received any payments from Ukraine’s Naftogaz since November.

On the same day, the Gazpom CEO said that Ukraine would owe Russia about $5.2 billion for natural gas as of June 7 if it makes no payments by that date.

PROBLEM STILL NOT SOLVED

During the last trilateral energy meeting between Russia, Ukraine, and the EU in Berlin, Russia said it would only consider lowering the price of gas to Kiev if it begins paying off its gas debts. Naftogaz could transfer $2 billion by May 30 and another $500 million by June 7, which will cover unpaid gas bills from November to April. Russian 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.

A source close to the negotiations told RIA Novosti that Kiev’s decision about repaying a part of its debt to Russia is expected after Friday’s three-party gas talks in Berlin.

Kiev has repeatedly stated that it would pay back debts for Russia gas in 10 days if Gazprom agreed to set the price at $268.5 per 1,000 cubic meters.

Ukrainian Energy Minister Yuriy Prodan stated that Kiev has enough money to repay Gazprom debt. On Thursday, the interim Ukrainian authorities ordered an increase in the authorized capital of Naftogaz to 22.3 million hryvnias (around $2 billion) by issuing additional shares, which could help the company pay off its debts.

Meanwhile, on April 30 the International Monetary Fund approved a two-year $17.1 billion bailout for Ukraine to help the country’s economy. Earlier this month, Kiev received the first tranche of $3.16 billion, but has yet to use this money to repay its gas debt, instead insisting on reduced prices.

Kiev decided to appeal to the Arbitration Institute of the Stockholm Chamber of Commerce in hopes that its debt and the Russian gas price will be revised. Norwegian law firm Wikborg, Rein & Co. has agreed to represent Naftogaz in its litigation against Russian gas giant Gazprom.

On Friday the sides will discuss the unresolved problems that have remained unchanged for several months, raising the concern in Ukraine and Europe about possible disruptions in gas supplies from Russia.