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

Ebola Death Toll Nears 5,000 as Virus Advances

West Africa bears heaviest burden; Mali toddler’s death raises new fears More

Jordan’s Battle With Islamic State Militants Carries Domestic Risks

Despite Western concerns that IS militants are preparing a Jordanian offensive, analysts call the kingdom's solid intel a strong deterrent More

Asian-Americans Assume Office in Record Numbers

Steadily deepening engagement in local politics pays off for politicians like Chinese-American Judy Chu 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.
Talks to Resume on Winter Gas for Ukrainei
X
Al Pessin
October 25, 2014 4:21 PM
Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Talks to Resume on Winter Gas for Ukraine

Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video Comanche Chief Quanah Parker’s Century-Old House Falling Apart

One of the most fascinating people in U.S. history was Quanah Parker, the last chief of the American Indian tribe, the Comanche. He was the son of a Comanche warrior and a white woman who had been captured by the Indians. Parker was a fierce warrior until 1875 when he led his people to Fort Sill, Oklahoma, and took on a new, peaceful life. As VOA’s Greg Flakus reports from Cache, Oklahoma, Quanah’s image remains strong among his people, but part of his heritage is in danger of disappearing.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7893
JPY
USD
107.68
GBP
USD
0.6238
CAD
USD
1.1214
INR
USD
61.185

Rates may not be current.