News / Economy

Ukraine Eyes Arbitration If Russia Doesn't Cut Gas Price

FILE - Pipes are seen at a gas compressor station in the village of Boyarka, outside Kyiv, Ukraine, Dec. 19, 2012.
FILE - Pipes are seen at a gas compressor station in the village of Boyarka, outside Kyiv, Ukraine, Dec. 19, 2012.
Reuters
Ukraine warned on Saturday it would take Russia to an arbitration court if talks with Moscow failed to roll back hikes in the price of natural gas that Kiev called an act of economic aggression.

Russia nearly doubled the price Ukraine pays for its gas this week, forcing Kiev, whose economy is in chaos, to enter into emergency talks with European neighbors to boost cheaper imports from the West.

Ukraine accuses Russia of using the price hikes as a tool of economic pressure after popular protests in Kiev ousted pro-Russian president Viktor Yanukovich in February, souring relations between the two former Soviet republics.

Russia seized Ukraine's Crimea region and formally annexed it last month widening the dispute into the biggest stand-off between Russia and the West since the end of the Cold War.

"Our Russian neighbors have carried out yet another form of aggression against Ukraine - aggression through its gas supplies. This price is the highest on European territory and it is not an economic but a political price," said Prime Minister Arseny Yatseniuk at a cabinet meeting.

Ukraine is still in talks with Russia to cut the gas price, which Moscow raised to $485 per 1,000 cubic meters from a previously discounted price of $268.50, making it now by far the highest price paid in Europe for Russian gas.

The Russian gas export monopoly Gazprom says that on average it charges its European customers between $370 and $380 per 1,000 cubic meters.

Ukraine imports more than half its gas needs from Russia.

"If we don't come to an agreement [with Russia] then there is a procedure laid out in our contract, going to the arbitration court in Stockholm," Ukrainian Energy Minister Yuri Prodan told journalists before a cabinet meeting.

"We are not trying to break our contract but to set up a fair price like in Europe," he said.

Alexei Miller, Gazprom's chief executive officer, said in a Rossiya 24 television interview recorded on Friday and aired on Saturday that Ukraine had accepted the new price.

"The gas price included in Ukraine's budget is the price that is already at work today, $485, and this confirms one more time that Ukraine recognizes it as a market [price], recognizes the current agreement and is ready to pay that price for our gas," Miller said.

According to a 2009 contract, the price is calculated on the basis of several fuel product prices and Yatseniuk said there were no economic grounds to increase prices for gas.

In raising the price, Russia scrapped two discounts. One was introduced in 2010 when Ukraine agreed to extend terms for Russia's Black Sea Fleet in Crimea until 2042 and the second was agreed in December after Yanukovich scrapped a trade deal with the EU in favor of closer ties to Russia.

Miller said that the discounts have disappeared "all strictly according to the contract" because Kiev has not paid for deliveries. He said the unpaid bill rose to $2.2 billion as of the end of March from $1.4 billion in December.

"They [Ukraine] fully understand why this discount has disappeared, they fully understand that the cancellation of the discount is Ukraine's fault," Miller said, adding: "We cannot supply gas for free."

Emergency talks

Since Yanukovich left power Russia has increasingly pressured Kiev over its failure to pay for past gas debts. Russia and Ukraine clashed over gas pricing in 2006 and then again in 2009 when Russia turned supplies off to Ukraine during winter months, causing supply shortfalls further on in Europe.

Energy Minister Prodan said Ukraine would not siphon off gas from pipelines that cross its territory to deliver Russian gas to European consumers if Moscow turned off gas to Ukraine.

"Ukraine will fully carry out all obligations on gas transit. Ukraine has not even thought of taking that gas," he said.

Ahead of Saturday's cabinet meeting, Yatseniuk ordered Prodan to carry out talks with energy official in Brussels to discuss "concrete steps" towards importing gas from Europe.

He said on Friday Kiev was carrying out emergency talks with Slovakia, Hungary and Poland on supplies of gas from the West by reversing pipeline flow through infrastructure designed to carry Russian gas to Europe.

Gazprom's Miller said that reverse supplies from Slovakia may not be physically possible, which could mean it would be a "virtual reverse just on paper".

"This issue requires a very careful study and consideration," he said. "In particular, I think that European companies that are willing to reverse supply gas to Ukraine should very carefully, very carefully, look at the legality of such operations."

Currently around 40 percent of Russia's exports to Europe flow through Ukraine, with the rest sent to Germany via the Nord Stream pipeline under the Baltic Sea and via the Yamal Europe pipe through Belarus and Poland.

Yatseniuk said the reverse gas could save Ukraine, which is on the brink of default, between $120 and $150 per 1,000 cubic meters. Ukraine consumed 50 billion cubic meters in 2013.

Prodan said Ukraine wanted to buy gas from neighboring Slovakia, but Slovakia's gas company had declined to allow Ukrainians to examine its current transit facilities.

Slovakia's Eustream, which operates the gas network, denied it had turned away Ukrainian requests to inspect its facilities.

Slovakia is the EU gateway for Ukrainian supplies, with the potential to reverse flow more than 20 bcm into Ukraine, which could meet over a third of the country's gas demand, but not in a hurry. Ukrainian officials said they see possible imports from Slovakia at 10 bcm annually.

Analysts said it could take another six months for gas to actually start flowing from Slovakia to Ukraine, and that the link was unlikely to flow at maximum reverse capacity.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

Magical Photo Slides Show Native Americans in Late 1800s

Walter McClintock spent 20 years photographing the Blackfoot Indians and their vanishing culture at the dawn of the modern age More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs

World Currencies

EUR
USD
0.8874
JPY
USD
120.83
GBP
USD
0.6497
CAD
USD
1.3271
INR
USD
66.162

Rates may not be current.