Bloomberg News

EU Seeks Russia-Ukraine Gas Price Deal in May to Ensure Supplies

May 19, 2014

The European Union is seeking an agreement by the end of May on the price Ukraine pays for Russian natural gas as the threat of supply disruptions in Europe looms.

Prices for OAO Gazprom (GAZP)’s deliveries to Ukraine in April and May as well as supplies from June remain contested, EU Energy Commissioner Guenther Oettinger said today in Berlin. While the EU and Russia agree that Ukraine must pay its outstanding gas bills, Russia’s demand of $485 per 1,000 cubic meters of gas is out of line with market conditions, he said.

“We will do everything” to help state-owned gas company NAK Naftogaz Ukrainy pay off its Russian debts, Oettinger told reporters after talks with Russian Energy Minister Alexander Novak and Gazprom Deputy CEO Alexander Medvedev. Aid by the EU and the International Monetary Fund should help settle old bills and ensure that Ukraine and Naftogaz can pay their way “in the next days, weeks and months,” Oettinger said.

Ukraine depends on Russia for about half of its gas and is a conduit for EU supplies, increasing the stakes in the conflict that escalated with Russia’s annexation of Ukraine’s Crimea region in March. Soviet-era pipelines crossing Ukraine provide about 15 percent of European demand.

Russia is “waiting for a signal” from Ukraine that it will pay its pre-April debt, Novak said at the joint news conference. Only then is Russia ready to discuss possible rebates for Ukraine, he said.

Ukraine is ready to pay neighboring Russia $4 billion for natural gas in exchange for an agreement to return to a lower price for the fuel as Russia threatens to halt shipments and risks supply disruption to Europe, the Ukrainian Energy Ministry said last week. The sum would cover shipments from last year through May and is calculated based on the first-quarter rate of $268.50 per 1,000 cubic meters.

The European Commission and Russia plan to resume talks on May 26 in Berlin with the aim of striking an agreement before June 1, Oettinger said.

To contact the reporters on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net; Brian Parkin in Berlin at bparkin@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net Tony Czuczka, Paul Abelsky


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