Europe's Energy Commissioner: Russia Must Set Fair Gas Price for Ukraine

Europe's Energy Commissioner: Russia Must Set Fair Gas Price for Ukraine

Ahead of gas talks between Ukraine, Russia, and the European Union, Europe’s Energy Commissioner Guenther Oettinger said Ukraine must pay back its debt, but Russia needs to offer a fair price.

“The price for the months of January, February, and also now, is disputed so Ukraine has to explain today that it will make or has already made a first payment, a significant amount, a high three-digit million amount in dollars,” Oettinger told German radio station Deutschlandfunk. This is necessary “so that it’s clear it is prepared to accept payment obligations; those who get gas must pay,” he added.

After parliament ousted Russia-backed President Viktor Yanukovych, Russia’s gas giant Gazprom took steps to punish Ukraine. First, Gazprom threatened to shut off Ukraine’s gas, then raised the price to $485 per 1,000 cubic meters. The company decided to scrap a discount signed in December, which was worth $268.50 per 1,000 cubic meters. Oettinger said the new price is too much and does not match the market conditions.

Europe relies on Russia for gas and energy, and the majority of the pipelines run through Ukraine. This could cause a disruption to Europe’s supply, as well, especially since the EU told Ukraine they would help with gas. Four ambassadors asked the U.S. to export more natural gas to Europe, and Russian President Vladimir Putin told Europe its gas supply would be threatened if it did not help Ukraine pay its debt. Europe fought back and said it could receive gas from other sources, and Putin backed down somewhat.

Russia proposed the South Stream, which would bypass Ukraine and flow gas through Romania and Bulgaria. Oettinger pointed out that the new pipelines will not change volumes of gas supplied, and it will still be purchased from Gazprom. He also noted that it does not solve short-term needs.

“But South Stream would probably take about three years, probably even longer before it’s running at full capacity,” Oettinger said in Brussels.

“So as far as short-term measures are concerned it’s not really an issue. It’s the transit countries such as Ukraine which are on the forefront of our concerns at present,” he added.