5th round of Ukraine gas talks ends, negotiations to continue — Oettinger

The fifth round of three-party gas talks involving Russia, Ukraine and the European Union has ended, but the sides have failed to agree their positions and the talks will continue Tuesday, European Commissioner for Energy Guenther Oettinger said.

Oettinger said the parties had long talks (over 7 hours) this evening and this night, and added that negotiations continue. He said the parties have discussed issues of gas prices, the current contracts, market, neighboring countries and the current situation, but added that many questions remain and that positions on many issues differ.

According to the European energy commissioner, Russia, Ukraine and the EU agreed not to take wrong actions. He said Ukrainian and Russian officials should discuss the developments with their governments and heads of state and say they are ready to discussthe situation on Tuesday evening or Wednesday morning.

According to Russian Energy Minister Alexander Novak, the Russian gas price for Ukraine for June, July and August was discussed during the meeting for the first time.

Kiev has already repaid part of its gas debt to Moscow following previous rounds of gas talks.Novak confirmed Moscow’s position that Ukraine should repay the gas debt for November-December 2013 to the tune of $1.451 billion (as of June 2) and $500 million for April-May 2014 by June 10.

Ukrainian parliament-appointed Energy and Coal Industry Minister Yuriy Prodan in turn said after the fifth round of talks that Russian state energy giant Gazprom offered Ukraine a discount on gas through reduction of duties. Prodan said no new achievements have been reached at the talks since June 2.The energy minister said reliability of gas transit to European consumers and its pumping into underground storage facilities were also discussed at Tuesday’s talks.

He said Gazprom is ready to lower the gas price for Ukraine to $385 per 1,000 cubic meters as the export duty totals some $100.

Gas price battle

After Crimea’s accession to Russia, the price for 1,000 cubic meters of gas for Ukraine exceeded $485. Oettinger earlier said a fair price for Ukraine would be in the range of $350-$380 per 1,000 cu m. Official Kiev still insists on the return to an earlier price of $268.5 per 1,000 cu m.

The undisputable part of Ukraine’s debt for November-December 2013 stood at $1.454 billion as of Monday, June 9. Moscow is waiting for the debt to be repaid. However, Prodan reiterated Kiev’s position that the debt repayment will start only when a price acceptable for Ukraine is approved.

Gazprom CEO Alexey Miller said June 2 after a regular round of the three-party talks that Gazprom is ready to cut its gas price for Ukrainian state energy company Naftogaz Ukrainy even beyond the limits of export duties.

Miller told journalists that the Ukrainian gas debt should be repaid, the Russian side will be ready to consider the price issue resolution scheme “not only through reduction of the export customs duty but also through direct commercial talks on a corporate basis,”.

Earlier, Novak said Moscow is ready to lower the gas price for Ukraine within the limits of the export duty if Kiev repays its accumulated gas debt.

Moscow recently substantially raised the price for gas supplied to Ukraine from the figure of $268.5 per 1,000 cubic meters agreed last year when an association agreement with the European Union was shelved in November 2013.

In the second quarter of 2014, the price for Russian gas for Ukraine was set at $385.5 per 1,000 cu m. Gazprom said earlier that the price rose from $268.5 due to the return to earlier contract agreements, as Ukraine failed to fulfill its commitments under an additional agreement concluded in December 2013, which obliged the country to pay for supplied volumes of Russian gas in time.

On April 2, Russian President Vladimir Putin signed a law on denunciation of the Kharkiv Accords with Ukraine, which were struck in 2010 and stipulated that Russia’s lease of naval facilities in Crimea (then part of Ukraine) would be extended by 25 years beyond 2017 - until 2042.

The Kharkiv deals envisioned a discount of $100 per 1,000 cu m on Russian gas for Kiev. Now that the accords have been denounced due to Crimea’s accession to Russia, the discount is no longer applied, raising the gas price by another $100 to $485.5 per 1,000 cu m.

 Coup in Ukraine

Despite Moscow’s repeated statements that the Crimean referendum on secession was in line with the international law and the UN Charter and in conformity with the precedent set by Kosovo’s secession from Serbia in 2008, the West and Kiev have refused to recognize the legality of Crimea’s reunification with Russia.Ukraine saw a coup in February, with new people brought to power amid riots as then-President Viktor Yanukovych had to leave the country citing security concerns. Crimea refused to recognize the new Kiev authorities and seceded from Ukraine to join Russia after a referendum in March.

Ukraine hopes to annually obtain about 10 billion cubic meters of gas through gas reverse supply schemes from Slovakia, Poland and Hungary. In this way, Ukraine can only cover a third of its Russian gas imports due to supplies from Europe.