Russia decided on 14% gas discount for Ukraine ahead of meeting

The Russian government released a resolution on June 29 to decrease the export duty for gas supplied to Ukraine in 3Q15, according to its website. Based on an earlier announced contract price of USD 287.15/tcm, the duty reduction will be equal to USD 39.97/tcm, or 14% of gas price.

As a result, the price of Russian gas for Ukraine will remain in 3Q15 at the level of the previous quarter, or about USD 247/tcm. In 2Q15, the discount to the USD 347/tcm starting price was USD 100/tcm, as Russian government did not apply export duty.

The energy ministers of Ukraine and Russia are scheduled to meet on June 30 in Vienna for a trilateral meeting – with the mediation of EU representatives – to discuss gas pricing for the third quarter and future periods. The Ukrainian government stated it sought a higher discount for Russian gas (which could be up to 30%, or USD 86.15/tcm, for 3Q15) and fixing the discount for a period longer than a single quarter.

Alexander Paraschiy: The Russian side made a strong preemptive move ahead of the Vienna meeting, and it is very unlikely that Ukraine will be able to get a better price for Russian gas in the third quarter. Russia attributed the smaller-than-requested discount (Ukraine expected 30%) to market reasons, as the USD 247/tcm price is close to the EU market price. For Ukraine, it will be important today to ensure that the pricing of Russian gas will be based on market principles not only in the next quarter, but later ones as well.

We also do not rule out that Ukraine will refuse the new Russian discount for political reasons. This is the first time since 2010 that the Russian government will charge an export duty for gas supplied to Ukraine (USD 46.18/tcm in 3Q15, we estimate). The idea that the budget of Russia, an aggressor state, will receive direct revenue from each cubic meter of gas supplied to Ukraine in 3Q15 is very unlikely to be welcomed by the majority of Ukrainians these days.

Источник: Конкорд Капитал