Gazprom’s Miller says Ukraine will owe $5.2 billion by June 7

Gas Facility file photo

(Business New Europe – bne.eu – Tim Ash, Standard Bank – May 29, 2014)

I guess that is the $2.5bn for the period to the end of March, another $1bn for April/May, and then $1.7bn in pre-payment for June, as previously demanded by Moscow.

EU officials have suggested though that $4bn is owed to date, and under a provisional deal put together by the Europeans, $2bn has to be paid by May 29, and then $500m by next week, to fend off gas cuts next week.

This will all be a key test of Moscow’s willingness to provide concessions to the Poroshenko administration. I still tend to think that Moscow will be reluctant to actually cut off gas supplies, as ultimately this hurts Russia by forcing accelerated diversification by Europe away from Russia – the China deal is a small drop (one quarter) in the Ocean compared still to sales to Europe.

My gut feeling here is that the gas issues get temporarily resolved to prevent the taps being turned off, and Russia buckles, as it will want to:

a) show Europe that it is key still to ensuring energy supplies to Europe;

b) if it concedes any ground, it can imply that it is being very reasonable, and by so doing heads off sanctions risks.

And how better than for Putin to deliver all this during next week’s trip to Paris – a “gift” for his friends in Europe, amid celebrations of the Allied victory against Fascists and Nazis in WWII. And even if a deal is done over gas – in Russia’s own self interest – this might not really change Russia’s tactics on the ground in Ukraine, of still making life very difficult for the new Maydan administration in SE Ukraine.

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