Bloomberg News

Russia-Ukraine Gas Talks Resume as Putin and Merkel Speak

June 11, 2014

Russia gave Ukraine an extra six days to make payments for natural gas as the countries resumed European Union-brokered talks in Brussels.

The new deadline is 10 a.m. Moscow time June 16, Alexey Miller, chief executive officer of Russian gas exporter OAO Gazprom, said today in Brussels after meeting with EU Energy Commissioner Guenther Oettinger.

Ukraine won’t pay before Russia accepts a new “package” deal, including gas price changes, Ukrainian Energy Minister Yuri Prodan said after that, according to Interfax. Both commented before the three-way negotiations between Oettinger, Prodan and his Russian counterpart Alexander Novak started at about 10 a.m. local time.

The EU, dependent on Russian gas piped through Ukraine for about 15 percent of its supplies, is trying to broker a deal to maintain shipments amid a dispute over payments for the fuel. In Ukraine, government forces and rebels claiming allegiance to Russia continue to clash in the east of the country.

Oettinger is optimistic an agreement to end the gas price dispute can be arrived at in the next few days, he told reporters yesterday evening. The talks were postponed from yesterday because of the late arrival of the Russian delegation to Brussels, the EU said.

‘Constructive Position’

Russia offered to lower Ukraine’s price by $100 per thousand cubic meters through an export-duty break, Ukrainian Prime Minister Arseniy Yatsenyuk said in Kiev today before the talks. The country can’t accept that because Russia is able to change the decision any time, he said. Ukraine insists the supply agreement in place since 2009 should be changed.

“We know Russian tricks and we stick to our proposal to change the contract,” Yatsenuk said.

Russian negotiators are “authorized to continue the discussion with a constructive position, with a view to achieving a mutually acceptable agreement” despite difficulties, the Kremlin’s press service said in an e-mailed statement after Russian President Vladimir Putin and German Chancellor Angela Merkel discussed the matter by phone late yesterday.

Novak and Miller met in Moscow with Putin before they departed for the Belgian capital, said an official who asked not to be identified as the gathering was private.

“The Russian side has made a step forward and to continue the negotiations, which took place the last few days very intensively, decided that the pre-payment mode is transferred to Monday at 10 a.m.,” Miller said early morning today.

Gas Upfront

This month, Gazprom said Ukraine should settle its debt or pay for gas upfront, threatening to cut off supplies should it fail to meet the deadline. Ukraine owes $1.45 billion to Russia for fuel supplied in November and December last year and $3 billion for April and May, according to Gazprom.

Ukraine disputes the sum and the price, which Russia raised by 81 percent in April. Gazprom had already extended the payment deadline from June 2 after receiving $786 million for supplies made in February and March.

“I asked the company to postpone this with the hope of reaching an agreement,” Putin said on June 6 after a first meeting with new Ukrainian President Petro Poroshenko in France.

In April, Gazprom rescinded a price discount granted in December because of Ukraine’s mounting debts, while Russia stripped its neighbor of a 2010 export-duty break that it exchanged for a lease on its Black Sea fleet’s port in Crimea, which Putin annexed in March.

Ukraine has refused to pay the increased price of $485 per thousand cubic meters, instead demanding a return to the first-quarter level of $268.50.

To contact the reporters on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net; Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Lars Paulsson at lpaulsson@bloomberg.net Alex Devine


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