Ukraine PM Warns "Prepare For Russian Gas Cutoff On Monday"

Tyler Durden's picture

Having set a deadline of June 16 (next Monday) for pre-payment of gas supplies from Russia to Ukraine, it appears Ukraine officials are willing to take the pain of no energy instead of paying what Gazprom is asking:

  • UKRAINE PM ORDERS GOVERNMENT, REGIONAL AUTHORITIES TO PREPARE ENERGY SECTOR FOR RUSSIAN GAS CUTS FROM MONDAY

The last negotiation had Ukraine willing to pay $326 and Russia asking $385, which Ukraine said "was not a market price." There are more problems for Europe though as Ukraine's PM has ordered the national regulator to revise 'transportation tariffs' for Russian gas via Ukraine (i.e. to Europe).

 

No deal...

  • *GAZPROM OFFER OF $385 FOR GAS `NOT A MARKET PRICE': KOBOLYEV
  • *GAZPROM NATURAL GAS PRICE FOR UKRAINE SHOULD BE LOWER: KOBOLYEV
  • *'NOT BAD' COMPROMISE OFFERED BY EC OF GAS AT $326: KOBOLYEV
  • *'WE WANT TO AGREE ON A FAIR PRICE' FOR GAS: NAFTOGAZ CEO

But...

  • *NO SET DATE FOR NEXT GAS TALKS WITH GAZPROM: NAFTOGAZ CEO

And so...

  • *YATSENYUK ASKS GOVT, NAFTOGAZ TO PREPARE FOR JUNE 16 GAS CUTOFF

As Novinite reports, negotiations are not going well,

Ukraine announced it would agree to pay USD 326 per 1000 cubic meters of gas following a three-way Brussels meeting over the dispute with Russia.

 

State-owned energy utility Naftogaz's CEO Andrey Kobolev said the price, which was offered by the EU, a mediator in talks between Kiev and Moscow, was acceptable, according to RIA Novosti.

 

This would however be a provisional step, with Kobolev describing it as a measure for "an interim 18-month period" during an arbitration procedure in Stockholm.

 

A potential breakthrough is now in sight after Ukraine turned down a fresh Russian proposal earlier this week which included a USD 100 worth reduction of the price Kiev is to pay for 1000 cubic meters.

 

This would have set the price at USD 385, which is still USD 100 up from what former Ukrainian President Viktor Yanukovych had managed to agree with Moscow. But a month after he left the country amid episodes of violence in the streets of Kiev, Gazprom introduced a 80% hike for Naftogaz and warned it would introduce prepayment for supplies (and thus virtually disrupt them) if the utility does not deliver on its debts to the Russian counterpart.

 

The current price is set at USD 485, an amount that Ukraine categorically refuses to pay. Russia, on the other hand, has claimed the total debt accumulated (partially as a result of Kiev's rebuff) is over USD 4 B.

 

Kiev's previous offer (rejected by Gazprom), on the other hand, was USD 268.5. In Kobolev's words, the price of USD 326 per 1000 cubic meters was just "the average" between Ukrainian demands and the status quo.

 

Gazprom is yet to comment on whether it would also agree to slash its latest proposal.

 

The Russian energy giant meanwhile announced it was still waiting for the transfer of a USD 1.9 B worth chunk of Ukraine's gas debt by June 16.

And so Ukraine is preparing for the worst case...

Ukrainian Prime Minister Arseniy Yatsenyuk instructs Naftogaz to file for international arbitration in Stockholm against Gazprom, according to statement on govt website.

Ukraine needs economically justified rate for gas transit

Yatsenyuk: “As the Russian Federation purposefully and unilaterally refuses to settle the conflict, energy security of Ukraine and the EU is undermined”