Ukraine declines Gazprom’s USD 385/tcm natural gas offer

The latest round of gas talks between Russia, Ukraine and the EU, held on June 11, brought no results. At the talks, Russia reaffirmed its offer of a USD 100/tcm “discount” to the price under the 2009 contract, which results in a final price of USD 385/tcm for 2Q14. At the same time, Russian Energy Minister Alexander Novak told journalists in Brussels that Russia is ready to fix the discount for one year.



Russian President Vladimir Putin asked his government to make this discount “unchanged for a certain period of time,” as he is aware of “concerns of our Ukrainian partners that this discount can be easily applied and removed”, according to president’s official website. “We have always demonstrated the utmost reliability of our agreements,” joked Putin. He warned that the Ukrainians’ efforts to gain a bigger discount are groundless and will lead the negotiations to a deadlock.



The Ukrainian side maintained its position, insisting the USD 385/tcm price is not the best offer at the moment. “We have price offers for reverse supplies (of Russian gas from the EU) that are lower,” Ukraine’s Energy Minister Yuriy Prodan told journalists in Brussels on June 11. The Russian price should be lower than the offers of EU companies, Prodan suggested, given that the EU price includes transit costs of Russian gas through Ukraine to EU countries and back to Ukraine. He suggested that the interim price could be between USD 268/tcm and USD 385/tcm. Prodan also reported that Ukraine will decide by Monday whether to sue Gazprom in the Stockholm Arbitration Court.



EU Energy Commissioner Günther Oettinger tried to find compromise in the conflict, suggesting at the same press conference that the Russian offer set “a good basis, upon which some additional discount could be applied”. He elaborated that the size of the additional discount can be linked to the volume of imported gas.



Another key issue of the gas talks was the repayment of Naftogaz’s debt for gas imported in November-December 2013 (USD 1.45 bln) and April-May 2014. The Russian and EU sides requested that Ukraine repay the remaining debt for 2013 and a part of debt for April and May, in the amount of USD 0.5 bln. The Ukrainian side pointed out that all the undisputed debt (for gas supplies in 1Q14) has been repaid, clearly indicating no willingness to heed to Russia’s demands until the pricing issue is resolved.



Alexander Paraschiy: The June 11 talks brought no progress as the Russian side continuing to insist on the validity of the 2009 contract signed for 10 years. As its only concession, Russia expressed its readiness to return to the USD 100/tcm discount that it unilaterally removed in April 2014. Instead, the Ukrainian side is insisting on a new contract with a “fair” price for Russian gas. All the attempts to find some golden mean by the representatives of the EU, who face the risk of not receiving Russian gas as soon as next week, have failed so far.



In this situation, we expect the EU will continue to pressure Ukraine to repay gas debt and pressure the Russian side to again postpone the deadline for cutting off gas supplies to Ukraine (which is June 16) and to offer more discounts to Ukraine. We continue to believe that Russia and the EU are the most interested in finding a compromise so they are more likely to offer concessions in the near future. All that Ukraine has to do in this situation is wait until the EU and Russia agree to an affordable price for gas.

Источник: Конкорд Капитал