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Ukraine to Gazprom: We won’t accept new gas prices and are suspending payments

Published time: April 12, 2014 18:34
AFP Photo / Sergey Supinsky

AFP Photo / Sergey Supinsky

The newly-appointed head of Ukraine’s national gas company says the country “sees no reason” to comply with the “political” hike in gas prices imposed by Russia, and will formally stop transferring money to Moscow until the situation is resolved.

In the aftermath of the toppling of Viktor Yanukovich and the secession of Crimea from Ukraine, Russia has raised from $268 to $485 per 1,000 cubic meters, starting from this month.

35 year-old Andrey Kobolev, who was appointed to head Naftogaz Ukraine, the state importer, by the government in Kiev, told ZN.UA news portal that his company is prepared to pay only the old prices.

“We believe the new price does not reflect market value, is unjustified and unacceptable. We are stopping all transfers for the duration of negotiations. We are hoping that economics will triumph over politics, as even a company of Gazprom’s size would suffer if it were to lose one of the biggest gas markets on the continent,” said Kobolev, who assumed his post a fortnight ago.

Ukraine says that the new price is the highest in Europe for any Gazprom customer country (Gazprom does not reveal its contract prices, but the average around the EU is $370).

Russia’s state-owned gas monopolist says the new rate reflects the cancellation of earlier discounts, and no longer includes payments for hosting Russia’s Black Sea Fleet, since Sevastopol, where it is stationed, is no longer a part of Ukraine.

Ukraine, which receives about half of its gas from Russia, has already accumulated more than $2.2 billion in debt over gas payments, even before the higher price kicked in, but Kobolev said that “any issue of repayment can be resolved only as a package deal with pricing problem”. Ukraine has also threatened to take Gazprom to the international arbitration court in Stockholm over the hike.

Head of the Ukrainian Naftogaz state oil and gas firm Andriy Kobolev (AFP Photo / Yuriy Kirnichny)
Kobolev also stated that there is a “high threat” of disruptions to Gazprom’s energy supply, similar to those that left much of Eastern Europe without heating in January 2008, while Kiev and Moscow thrashed out a deal.

The Russian giant supplies about a third of Europe’s gas needs, and 40 percent of that gas passes through Ukraine.

On, Friday Vladimir Putin warned that Russia does not wish to “unilaterally carry the burden" of supplying Ukraine if it refuses to accept prices, though later reassured worried Europeans that Moscow has no intention of cutting off supplies for the time being.

One idea that has been mooted by Ukraine and its westward allies, is re-pumping of Gazprom’s cheaper gas supplied to other countries back into Ukraine.

This flow reversal could either be done physically – by re-engineering the pipes – or virtually, by Ukraine holding onto some of the other countries’ gas as it passes through theirs. While the first solution presents technical difficulties, both are liable to be treated as a breach of contract by Gazprom, which forbids countries from reselling its supplies under specific circumstances.

So far, Hungary and Poland have said they are ready to channel gas into Ukraine, while Slovakia is awaiting the go-ahead from Moscow.

In any case, further clarification on the issue is unlikely to happen before a mooted four-way meeting between Russia, Ukraine, the EU and the US later this month.

Comments (60)


Jaroslav Belicka 05.08.2014 12:11

Which ever way you look Ukraine got itself into a big trouble. Ordinary people will uprise against elite and the chocolate billionaire baron Porkishenko who got them into this mess. When winter will come and there wont be enough gas to keep them warm troubles will multiply. No money no honey, no gas to keep you warm.
I guess you will start siphoning gas going through your territory to western Europe.


Emmett 18.04.2014 02:14

Thomas T 14.04.2014 15:34

Russia will lose big if it plays by the IMF/Federal Reserve bankers game. It needs to demand payment in gold. Sure the US, EU and Japan can print all their currencies, but they cannot print gold.


Russia should demand pay't in rubles and/or gold. If they accept US dollars they should immediately buy gold with it and have the gold tested immediately. US claim to have gold which is unlikely since federal reserve bank in US sold fake gold bars to China in 2009.

Maybe this is why Ukraine's gold was looted and taken to NY for "safekeeping'.


astrologo 15.04.2014 00:31

Russia is ready to sell all of its gas to China (there's a meeting of the leaders of the two countries on coming May) and other Asian markets, and close its pipelines to Europe. Gas prices will go up wildly in Europe.

View all comments (60)
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