Gazprom severs gas delivery to Ukraine

Ukraine - Russia gas crisis
Source: DollarPhotoClub

Ukraine will not receive any more gas from Russia’s Gazprom, unless up-front payments are made – the state-owned gas giant announced today.

“Today, from 10:00 Moscow time, Gazprom, according to the existing contract, moved Naftogaz to prepayment for gas supplies,” Gazprom said in a statement on Monday morning. “From today, the Ukrainian company will receive Russian natural gas only in the amounts it has paid for.”

Ukraine’s discounted gas-rate, negotiated by the ousted President Viktor Yanukovych, was axed in April leading to a price increase of 80 per cent. The price is now $485.50 per 1,000 cubic metres, the highest in Europe.

“The decision was made due to chronic non-payment from Naftogaz of Ukraine.” a statement from Russia’s Gazprom said.
“The arrears of the company for supplied Russian gas makes up $4,458 billion: $1.451 billion in November-December of 2013 and 3.007 billion in April-May of 2014.”

To continue uninterrupted deliveries of gas to Ukraine, Gazprom demanded a payment of $1.95bn (£1.15bn) by this morning. Ukraine refused to clear its debts completely in protest at Gazprom’s price increase.

The move follows a breakdown in crisis talks between Ukraine, Russia and the European Union on the issue. Heading into the negotiations, Kiev said it was ready to make the $1.95bn payment if Russia cut its price to $326 per 1,000 cubic metres. But Russian President Vladimir Putin said $385 per 1,000 cubic metres was his final offer.

The head of the State Duma Committee on Foreign Affairs, Alexei Pushkov tweeted today “Let Yatsenuk get shale gas from the United States.”

As Russian Pravda.ru reports, in a June 15 interview with Russia 24 TV channel Mr Pushkov called for sanctions against Ukraine, adding that “It’s time all negotiations on the gas issue are stopped. I consider the talks in Kiev inappropriate at a time when the Russian embassy in Kiev is attacked, ​​the government is silent about it, the police is idle, and Ukraine’s Foreign Minister offends the Russian president. What negotiations? These negotiations must be stopped, and so must gas supplies to Ukraine,”

At the moment, Russian gas is being transported to the EU via four pipelines, two of which do not enter Ukraine: Nord Stream is an offshore pipeline from Vyborg in Russia to Greifswald in Germany, while the Yamal–Europe pipeline connects natural gas fields in Western Siberia, Russia, with Germany and runs through Belarus and Poland.

Despite that, approximately 80% of Russian gas exports to EU – and about 15% of the EU’s gas supply – travels through the Druzhba and the Urengoy–Pomary–Uzhgorod pipelines across the Ukrainian soil.

Gazprom was quick to declare that it will continue supplying its European clients ‘at full volume’ and that it was Ukraine’s responsibility to guarantee uninterrupted transfer of gas through their country. However many are concerned that EU recipients might be affected.

In response to the latest developments, EU Energy Commissioner Guenther Oettinger said he would continue to work for an agreement despite the setbacks – adding that he was “not pessimistic” about a deal. His compromise proposal, that Kiev pay $1bn on Monday and the rest in instalments, was earlier rejected by Gazprom.

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