Russia-Ukraine June 10 gas talks produce no common ground

Ukrainian and Russian officials found little compromise in their talks on gas pricing and payment schedule on the night of June 9-10in Brussels, which occurred with EU intermediation. The sides practically made no progress beyond the June 2 agreement, according to Ukrainian Energy Minister Yuriy Prodan. EU Energy Commissioner Günther Oettinger reported that a new round of gas talks will start today at 9 p.m. or on Wednesday at 9 a.m. after the Russian and Ukrainian delegations consult with their governments.



The Russian side is ready to lower the gas price (which is USD 486/tcm now, based on the 2009 agreement) by reducing the export duty for gas (which is USD 100/tcm), Prodan said. Yet that approach is not acceptable, Prodan said, since the duty is only regulated by the Russian government and can be changed by Russia unilaterally at any time. Moreover, Prodan believes that the USD 386/tcm price for Russian gas (with the discount) is above the market. The Ukrainian side continues to insist that price of Russian gas should be USD 269/tcm (as it was in 1Q14), while it is ready to negotiate (and agree on some higher price), according to Prodan. A representative of European Commission told Interfax-Ukrayina that the price suggested by Ukraine is very unlikely to be agreed upon, while it is realistic to agree on a price of around USD 320-330/tcm.



Russian Energy Minister Alexander Novak confirmed, as usual, the readiness of the Russian side to continue talks on gas discounts and recalled that today is a deadline for Ukraine to pay a USD 1.45 bln debt for gas imported in November-December 2013, as well as to pay USD 0.5 bln as a part of a gas payment for April-May 2014. Earlier, Russia threatened to stop supplying gas to Ukraine if these payments were not made. Novak also said that the Russian side will talk on the future of South Stream at the upcoming meeting. South Stream is the gas pipeline from Russia to Bulgaria that is aimed at bypassing Ukraine. On June 8, the Bulgarian government ordered a halt to all construction work related to the project, upon the earlier insistence of the European Commission.



Alexander Paraschiy: The good news for Ukraine is that Russia seems to be ready to come back to the gas price that existed in 2010-2013, when the Kremlin provided a USD 100/tcm discount to Ukraine by eliminating the export duty for gas. Russia cancelled this approach in April with the unilateral annulation of its agreement with Ukraine on the USD 100/tcm discount and reintroduction of the export duty, while now it’s trying to resurrect this deal. Unlike before, the gas price range that is being discussed at the meetings is between USD 269 and USD 386 per tcm, while in the previous week it was between USD 269 and USD 486 per tcm.



The new “mid-price” is also encouraging for Ukraine: while in mid-May Oettinger declared the possible price in the range of USD 350-380 per tcm, now the talks are about USD 320-330. We believe this range will be achieved, but it’s clear that the EU will have to offer new concessions to Russia (e.g., with South Stream) to make Russia more comfortable with such a price for Ukraine. As we stated before, we believe that Russia and the EU are more determined in reaching a compromise in the gas talks than Ukraine is.

Источник: Конкорд Капитал