Ukraine, Russia Approach Gas Deal

Ukraine, Russia Approach Gas Deal

There is some hope Ukraine and Russia will come to a gas deal by the end of the week. Russia’s gas giant Gazprom granted Ukraine an extension after gas supplies from February and March were paid off. Russia has been using gas and energy as a political tool since Ukraine ousted Russia-backed President Viktor Yanukovych in February.

“Talks went for a long time yesterday… There is an understanding on how to move forward – this is very important,” Gazprom spokesman Sergei Kupriyanov said.

The two countries are holding talks in Brussels along with the European Union. Russia provides 30% of Europe’s gas, and the majority of the pipelines flow through Ukraine. Russian President Vladimir Putin even threatened Europe’s gas supply if the EU did not help Ukraine pay off its debt.

The biggest disagreement is over price. After Yanukovych was thrown out, Gazprom told Ukraine they scrapped the gas discount given under Yanukovych’s reign. The price went from $268.50 per 1,000 cubic meters to $485 per 1,000 cubic meters. The new price is the highest among Gazprom’s customers; Europe pays between $300-$400.

“We look forward to the completion of negotiations with Russia’s Gazprom this week,” said Ukraine’s Prime Minister Arseniy Yatsenyuk. “We understand it will be hard to reach $268, but we will never accept $500.”

He also accused Russia of stealing Ukrainian gas since Moscow annexed Crimea from Ukraine.

“Earlier Ukraine was periodically accused of stealing gas. Now I can say that it is the Russians who are stealing gas – they stole our territory, stole Chornomornaftogaz, they stole 2.2 billion cubic meters of gas that was being stored in Crimea. So I’m asking: Who are the thieves?” he told parliament.

It is also important to reach a new deal because Ukraine needs to prepare for the upcoming winter. Yatsenyuk told parliament the country needs seven billion cubic meters.

“When we [the new government] came, underground storage facilities had 5 billion cubic meters gas – this is virtually buffer gas, which is impossible to lift. Underground storage facilities currently have 12 billion cubic meters gas. It is necessary to buy at least 7 billion cubic meters more to get through the heating season,” he said.

On Tuesday, the EU also told Bulgaria to stop working on the South Stream pipeline, which would allow Russia to transport gas to Europe around Ukraine. However, the EU said the pipeline might break a few rules. From The Telegraph:

But the Commission, the EU’s executive, has so far refrained from pushing for an outright cancellation and has instead engaged in a legal showdown with Gazprom and Bulgaria over regulatory details of the project.

The Commission says the project breaks EU rules that stop gas suppliers from also controlling access to supply networks.

It also said that tendering for work on the project may not have been carried out in accordance with EU rules.


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