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Kiev warns EU that transit of Russian gas via Ukraine territory may stop

A warning came to the European Union that transit of Russian natural gas to the EU via Ukrainian territory may stop. This warning is made in a letter Yuri Prodan, appointed by the Supreme Rada as minister of energy and coal industry of Ukraine, addressed to EU Energy Commissioner Guenter Oettinger, the press service of the Ministry of Energy and Coal Industry reports.

"We must say there is not much time for arranging for natural gas deliveries from EU countries to Ukraine. Unless this problem is resolved promptly, one may forecast the repetition of the 'gas war' of 2009 with the same scenario and with the same economics consequences and even with complete stoppage of gas deliveries to the West," Prodan's letter says.

The minister noted that the most pessimistic forecasts about the price of Russian natural gas had been proved in the recent days. Prodan stated it had already become known that since April 2014 there would be no discount specified in the Kharkov accords in the price of Russian gas for Ukraine.

In this connection the minister reminded to the European side about its stated intention to support Ukraine with gas supplies if Russia decreases or stops gas deliveries to Ukraine or raises the gas price considerably.

The Ukrainian cabinet of ministers expects that the price of Russian gas for Ukraine will rise to 480 dollars per thousand cubic meters from April 1. The price of Russian gas for Ukraine is 268.5 dollars per thousand cubic metres till the end of March.

Meanwhile, as deputy head of the board of the Russian gas giant Gazprom Andrei Kruglov said on March 26, 2014, Gazprom considers ways of redistributing transit streams to Western consumers if there were problems with transit via Ukraine. "Yamal-Europe and Nord Stream will provide for certain compensation if there are difficulties with transit via Ukraine," Kruglov said.

"There are no problems with transit via Ukraine so far, and, I hope, there will be none," he said. "Transit deliveries are made according to contracts," Kruglov said.

He also said that Ukraine's debt for gas amounts to 1.7 billion dollars. Regarding the possibility of the change of the gas price for Ukraine, Kruglov said that the gas price for Ukraine had been fixed by the contract up to 2019. Gazprom's representative pointed out that the discount on the gas price for Ukraine operated from the beginning of the year. "We will issue the information, also to reporters, whether the discount holds from the second quarter of the year," Kruglov said.

Gazprom CEO Aleksey Miller said earlier that March 7 was the deadline for Ukraine making payments for February gas deliveries. "Gazprom received no payments toward the debt. Ukraine's debt amounts to 1.860 billion dollars," Miller said. "Ukraine actually stopped paying for gas. This is contrary to provisions of the contract and to international trading practice," Miller said. "We have always fulfilled and will fulfill our contractual obligations but we cannot supply gas free. Either Ukraine repays the debt and pays for current deliveries, or there will be the risk of the repetition of the situation of early 2009. We will keep the Russian government posted on how the situation develops," the Gazprom CEO said.

In 2013, Gazprom increased gas export to Europe by 23.8 percent as compared to the previous year, bringing it to 139 billion cubic metres, Itar-Tass reports. Over half of this amount (84 billion cubic metres) is delivered by transit via Ukraine. According to the BP annual survey, Russia's share in the European gas market in 2013 made up 34 percent, that of Norway 35 percent, Algeria 14 percent, Qatar ten percent, Nigeria three percent and Libya two percent.

[Source: Itar Tass, Kiev, 28Mar14]

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