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Ukraine ready to buy Russian gas but no deal signed

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Staff Writer | December 12, 2016
Ukraine has confirmed its readiness to buy 1.5–4 billion cubic meters of Russian gas this winter and Moscow said it is ready to ensure exports to Ukraine and the E.U.
Alexander Novak
Energy   Russia, Ukraine and the E.U.
But no final deal was reached during the talks, Russian Energy Minister Alexander Novak told reporters.

“The Ukrainian side has expressed its readiness to buy 1.5–4 billion cubic meters of gas in the winter period to ensure reliable supplies to Ukrainian consumers and transit to European consumers.

In their turn, Russia and Gazprom confirmed readiness to supply Russian gas to Ukraine in the framework of the existing contract, which will be in force until 2020,” Novak said.

Moscow and Kiev will continue the talks, but they have no price disagreements as they have agreed that the Russian gas price for December, defined by the contract’s formula, is competitive and is lower than the current prices on the spot market.

Russia, Ukraine and the E.U. will continue contacts on the gas issues, and Gazprom and Ukraine’s energy holding Naftogaz Ukrainy are to hold consultations in the first place, he said.

Naftogaz Ukrainy said on its Facebook page that the sides have failed to sign an additional agreement to the contract, which is crucial for Kiev’s purchases of gas as it would eliminate critical risks for Ukraine. CEO Andrei Kobolev also told reporters that Ukraine sees purchases of Russian gas impossible without the agreement, but hopes to sign it in the future.

European Commission Vice President for Energy Union Maros Sefcovic said that Russia, Ukraine and the E.U. were very close to signing the agreement during the meeting, but the deal’s format is yet to be discussed, and the E.U. is ready to mediate further talks between Moscow and Kiev.

Under the previous winter package, Naftogaz Ukrainy bought 2 billion cubic meters of gas from Gazprom for $500 million it borrowed with the help of the European Commission.

Ukraine stopped purchasing Russian gas on November 25, 2015. The companies signed additional agreements that suspend the take-or-pay condition for Ukraine under all previous winter packages.

Ukraine has illegally imposed a $6.8 billion fine on gas giant Gazprom creating risks for the transit of Russian natural gas to the E.U., Energy Minister Alexander Novak said in letters sent to European Commission's Vice President for Energy Union Maros Sefcovic and other E.U. ministers.

"I have given the letter to mister Sefcovic regarding the recent decision of the Kiev Economic Court against Gazprom in Ukraine. We express deep concern with the decision made on December 5 to impose the $6.6 billion fine, Novak told reporters.

"We see this as an absolutely illegal decision as it was not made by the Stockholm Arbitration Court. This allows us to speak about new risks for the transit of gas to European consumers because the Ukrainian side may decide to recover the penalty, a corresponding fine."

In 2015, Ukraine's antimonopoly committee imposed an 85.9 billion hryvna, or $3.4 billion, fine on Gazprom to punish the company for its monopolist position on the gas transit market.

Gazprom said it was baffled by the decision because it does not operate in Ukraine but concedes its gas to state energy holding Naftogaz Ukrainy on the border with Russia. Gazprom challenged the ruling, but all Ukrainian courts dismissed its complaints.

On October 31, the antimonopoly committee doubled the fine by including a penalty for non-payment. On December 5, the Kiev Economic Court obliged Gazprom to pay 171.8 billion hryvnas, or $6.8 billion in the fine.

"I have sent similar letters to ministers of countries that consume Russian gas and who receive it through Ukraine, and I have expressed a corresponding concern. We think that this is an unprecedented case that has only increased the risks for a smooth passing of the winter and for reliable provision of gas to European consumers," Novak said.

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