Russia is ready to negotiate on gas issue with Ukraine, EU

(Business New Europe – bne.eu – Concorde Capital – April 24, 2014) The Russian Energy Ministry has offered EU Energy Commissioner GYnther Oettinger to convene negotiations with EU and Ukraine on “natural gas issues” in Moscow on April 28, Interfax reported on April 23 citing a ministry representative. “We are ready to discuss with partners the place and time of the meeting”, the sour…

The Russian Energy Ministry has offer ed EU Energy Commissioner GYnther Oettinger to convene negotiations with EU and Ukraine on “natural gas issues” in Moscow on April 28, Interfax reported on April 23 citing a ministry representative. “We are ready to discuss with partners the place and time of the meeting”, the source added. This offer was an official reply to Oettinger’s initiative to start trilateral negotiations.

The same day, Ukraine’s Energy Minister reported that Ukraine is importing 40-60 mcm of Russian gas per day during April, while it still has not agreed with the Russian side on the price of this gas. According to Interfax sources, Ukraine exported 1.57 bcm of natural gas from Russia during April 1 Ð April 21.

Alexander Paraschiy: As we anticipated earlier, the EU and Russia will try to find common ground on the dispute over the pricing of Russian gas for Ukraine. There are three options for 2Q14 prices that can be negotiated: USD 268.5/tcm on which the Ukrainian side is insisting (the price based on the Dec. 2013 deal between the Russian and Ukrainian presidents); USD 485.5/tcm based on Russia’s demand (according to the 2009 gas agreement); and USD 385.5/tcm, the price based on the so-called Kharkiv agreements of 2010 (granting a USD 100/tcm discount to the price calculated by the rules of the 2009 gas agreement, in exchange for the extension of Russia’s fleet staying in Crimea). Russia has invalidated the Kharkiv agreements unilaterally – and the EU has already expressed its “deep concern” over the invalidation, as can be seen from an open letter of EU Commission President of April 17.

We believe the USD 385.5/tcm price could become a compromise for all parties, while at the moment we do not see how this price can be technically approved by the Russian side. Again, we believe that Russia and EU (not Ukraine) are highly interested in an urgent solving of the Ukraine-Russia dispute over gas pricing. Ukraine can live without Russian gas over the next 4-5 month, while Russia and the EU need to secure uninterrupted gas supplies through Ukrainian territory as soon as possible.