Russia, Ukraine Continue Gas Talks as South Stream Construction is Stopped

Russia, Ukraine Continue Gas Talks as South Stream Construction is Stopped

Ukraine and Russia gas talks are still going on, but nothing is resolved. Russia state owned gas company Gazprom extended Ukraine’s payment deadline to June 16 while the South Stream pipeline, a project to bypass Ukraine, meets setbacks.

Russian President Vladimir Putin told Prime Minister Dmitry Medvedev to reduce the price from $485 to $385 per 1,000 cubic meters. But Kiev wants the price to be $285 per 1,000 cubic meters because that is “market” price, even though the $ 100 cut would put Ukraine within the European market range. Prime Minister Arseniy Yatsenyuk called the slashed price a Russian trap and refused to take it.

“If gas is a commodity, as it is all over the world, then we are trading on the basis of the contract and not on the basis of whether Russia likes or dislikes the Ukrainian government,” he said.

$485 is the highest price for a Gazprom customer and Kiev views it as payback for ousting Russia-backed President Viktor Yanukovych in February. In December, right after protests against Yanukovych started, Gazprom handed a huge discount to Ukraine of $268, but more than doubled it after he was thrown out.

The European Commission is in charge of these gas talks after Putin suggested a three-way talk, but after five rounds there has not been a conclusion and it appears it will not end soon. The meetings on Tuesday did not end until 1AM GMT after eight hours of discussions. The three bodies will talk again on Wednesday.

Europe can be affected if Russia cuts off Ukraine. Half of the gas pipelines to Europe from Russia run through Ukraine. Gazprom started the South Stream pipeline, which would travel around Ukraine, but the project met setbacks during this week. The pipeline goes through the Black Sea to Bulgaria then through Serbia, Hungary, Slovenia, and ends in Austria. However, the EU said the pipeline might break the bloc’s rules and “is concerned that the contracts for the Bulgarian portion of South Stream were not awarded transparently.” Bulgaria, which receives almost 90% of all gas from Russia, suspended work on June 8.  Serbia did not want to stop construction, but Deputy Prime Minister and Minister of Energy Zorana Mihajlovic said the country might have to halt because of Bulgaria.

If South Stream is completed it will take away any cards Ukraine might hold with Russia.

“If South Stream is complete, it will make Ukraine much weaker with regard to Russia,” said Sergei Pikin, director of Energy Development Fund. “Neither the United States nor the European Union want this to happen.”

Russia was furious when Bulgaria stopped construction.

“Russia has great assets in Bulgaria, both political and economic and it won’t hesitate to use them,” said Edward Lucas, senior editor at The Economist. “Behind this crisis in Ukraine is a big Russian objective of trying to [obstruct] the EU’s ability to set the rules in the energy market and this is one of the battles in that war and Russia won’t concede defeat lightly.”

Breitbart News interviewed Lucas in April and he said Putin “is opportunistic; if he sees weakness, he will exploit it. He sees the gap between the West’s words and deeds and is exploiting it ruthlessly.”