Interfax: SUMMARY: Gazprom slashes gas price for Ukraine by third, looks at new model of relations

File Photo of Blue Flame from Natural Gas

MOSCOW. Dec 18 (Interfax) – Russia’s Gazprom (MOEX: GAZP) and Naftogaz Ukraine, in the presence of the two countries’ presidents on Tuesday, signed addenda to January 19, 2009 contracts on the purchase-sale, delivery and transshipment of natural gas for 2009-2019.

Discount

President Vladimir Putin said after the signing that the documents would enable Gazprom to supply gas to Ukraine at a price of $268.50 per 1,000 cubic meters, compared to the current price of $400.

The details of the addendum to the transshipment contract have not been disclosed yet.

“Gazprom and Naftogaz Ukraine signed an addendum that allows Gazprom to sell gas to Ukraine at a price of $268.50 per 1,000 cubic meters, which it plans to do. Right now this price is about $400. It was, rather,” Putin said.

“In any case, we believe that this is also a temporary solution. Meaning that long-term, durable agreements should and will be reached. This applies to both gas supplies to Ukraine and ensuring uninterrupted transit to Russian customers in Europe,” Putin said.

The Russian president recalled that thanks to a decision made in 2010 Ukraine is already getting a discount on Russian gas that has saved Ukrainians $10 billion.

Prospects

Gazprom has never concealed its interest in the gas assets of neighboring countries. The Russian gas giant’s equity participation in Ukraine’s gas transport system has long been discussed, but years of negotiations only pushed the parties further away from a partnership.

Gazprom has already acquired ownership of the gas sector of Belarus and is using its transit capacity at full capacity to the detriment of Ukraine. The company is preparing to build the South Stream pipeline, the objective of which is to completely stopping transit shipments of gas through Ukraine. However, representatives of both parties said Tuesday that the discount on the gas price implies the prospect of a broader partnership.

“Russia is prepared to further accommodate its partners, but we are facing the goal of elaborating a truly efficient and longstanding interaction plan and switch from regular discussions on the price to pragmatic cooperation, both concerning supplies of gas to Ukraine and its reliable transit,” Putin said.

“This is not a new contract, it is an old one that makes it possible to work in Ukraine in difficult conditions and move toward agreements on working on a permanent basis,” Gazprom CEO Alexei Miller told reporters.

Ukrainian President Viktor Yanukovych said the price was “the product of our joint work.”

“We need to think about how to develop work that would create incentives for both sides. And I mean create transparency in the work of the Ukrainian gas transport system, and organize cooperation in the oil and gas sector. We have great prospects and joint projects that can be implemented,” Yanukovych said.

Naftogaz CEO Yevhen Bakulin told reporters that the agreements that have been reached are indefinite. “Yes, they are for a certain amount of time. The certain amount of time has not been set,” he said.

“The price will be in effect until events develop further. Some further progress on this issue is possible given further cooperation. I mean what will be the economic prospects of further cooperation,” Bakulin said.

Ukraine Map and Flag

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