Russia to Discuss Gas Price Cut With Ukraine Only If Debt Paid

Russia will consider a compromise on natural gas prices with Ukraine only after its neighbor pays its debt for previous supplies, the Energy Ministry said as preparations for talks begin in Brussels today.

Ukraine hasn’t used any of the funds received under a $27 billion international package to pay down its gas debt, Russian Deputy Energy Minister Anatoly Yanovsky told reporters today in Moscow. The country sandwiched between Russia and the European Union received the first $3.2 billion of aid last week. OAO Gazprom, Russia’s gas exporter, has billed Ukraine for $3.51 billion for fuel delivered in 2013 and through April.

Europe imports about 30 percent of its gas from Russia, half of which crosses Ukraine, tying the EU’s energy security to stability in the transit country. Ukraine, which depends on Russia for half of its gas consumption, has been seeking to renegotiate a 2009 gas contract since before a popular uprising began in Ukraine’s capital in November.

Russia doesn’t need “pain and suffering” in Ukraine, Yanovsky said, after being asked about sanctions. “We want to trade normally and receive a normal price for our goods.”

Gazprom raised the price it charges Ukraine for gas by 81 percent in April, to $485 per 1,000 cubic meters, more than any EU member pays.

Supply Risks

Gazprom has to switch Ukraine to prepayments as the state-controlled company can’t allow the country to continuing building up its debt, Yanovsky said. Russia will present a preliminary gas bill for June on May 16, Energy Minister Alexander Novak said last week.

The move will probably lead to problems supplying Ukraine, Yanovsky said. That in turn may create risks for transit and EU countries may suffer during the winter unless Ukraine has filled its underground storage facilities, he said.

Last month Ukraine almost doubled gas imports from Russia to 2.6 billion cubic meters, data from the Russian Energy Ministry’s CDU-TEK unit show. Ukraine’s storage sites contained 8.5 billion cubic meters as of May 5, Gas Infrastructure Europe said last week. That is about 1 billion cubic meters more than the figure Ukrainian officials gave in early April and less than half the amount needed to start the heating season.

Ukraine, during initial trilateral talks with the EU and Russia in Warsaw on May 2, refused to disclose storage information to Russia. A second round of talks may be held as early as May 15 and 16, Yanovsky said.

Russian Prime Minister Dmitry Medvedev is meeting today with Gazprom Chief Executive Officer Alexey Miller and Novak, Pavel Zavalny, a lawmaker and the head of the Russian Gas Society, said at the news conference with Yanovsky.

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