Russian Gas Company Gazprom Cuts Off Gas to Ukraine After Talks Fail

Russian Gas Company Gazprom Cuts Off Gas to Ukraine After Talks Fail

Ukraine and Russia did not agree on a gas deal, and Gazprom, Russia’s state owned gas giant, stopped gas flow to Ukraine on Monday. Naftogaz, Ukraine’s state-owned gas company, filed a lawsuit against Gazprom early Monday morning.

“We have an announcement to make today – that gas supplies to Ukraine have been reduced to zero,” said Ukraine’s Energy Minister Yuri Prodan.

From The Kyiv Post:

Gazprom wants $486 to be paid per 1,000 cubic meters of gas but is willing to give a $100 discount, while Naftogaz wants the $268.5 price that in effect under overthrown President Viktor Yanykovych’s pro-Russian regime. Ukrainian Energy Minister Yuriy Prodan, in a hustle for compromise, named a $320 price, but it was not met by Russian side with enthusiasm.

The contract implies the possibility of changing the conditions of pricing, a point of crucial importance for Ukraine’s court battle, Kobolev added. Besides, the 2009 contract calls for settling disputes in the Stockholm Arbitration Court.

Gazprom filed its own lawsuit at Stockholm arbitration court over Ukraine’s $4.5 billion debt.

Ukrainian Prime Minister Arseniy Yatsenyuk called out Russia for using gas as a political tool to grasp control of Ukraine.

“But it is not about gas. It is a general Russian plan to destroy Ukraine,” he said. “It is yet another step against the Ukrainian state and against Ukrainian independence.”

In December, Gazprom provided Ukraine with a steep discount in gas prices at $268.50 per 1,000 cubic meters. But when parliament ousted Russian-backed President Viktor Yanukovych on February 22, Gazprom and Russia immediately threatened Ukraine’s gas supply. Gazprom demanded Ukraine pay back its $1.9 billion debt to the company, but then Russian President Vladimir Putin took it a step further and said the gas supply would be affected if Ukraine did not pay back its debt to Gazprom and Russia, which is over $4 billion. At first, Gazprom threatened to completely shut off the gas but instead decided to stop the discount and raise the price to $485 per 1,000 cubic meters.

During these gas talks, Russia offered to slash the price to $385 per 1,000 cubic meters in winter and $300 in summer. Ukraine said no, as Yatsenyuk considered it a trap move by Russia. The European Commission, which mediated the talks, told Ukraine to accept the price of $326 per 1,000 cubic meters. Ukraine thought the price was too high but decided to accept it and told Gazprom they would pay off the $1.9 billion debt. Gazprom rejected the offer.