Russia-Ukraine Gas Talks Make Little Progress as EU Mediates

  • EU-brokered trilateral talks were constructive, Russia says
  • Ukraine says Russia won’t sign extra accord on payment terms

A gas storage facility in Ukraine.

Photographer: Vincent Mundy/Bloomberg

Russia and Ukraine made little headway in natural-gas talks brokered by the European Union, the first trilateral meeting since a pricing dispute between the two former Soviet states prompted the government in Kiev to halt purchases last year.

Russian Energy Minister Alexander Novak and his Ukrainian counterpart Ihor Nasalyk met in Brussels on Friday to discuss stable supplies and transit of the fuel in talks hosted by Maros Sefcovic, the European Commission’s vice president for energy union. In the past two years, the commission has helped avert disruptions in the supply of Russian gas to Europe via pipelines crossing Ukraine.

“There was a full commitment to work closely together in order to ensure gas flows from Russia to Ukraine and gas transit to the EU,” the three negotiators said in a joint statement after the talks. “In this respect, it was agreed that the discussions will continue at all levels.”

Gas-price and debt disputes between Russia and Ukraine disrupted deliveries to Europe during freezing weather in 2006 and 2009. Ukraine carries about 40 percent of Russia’s EU-bound gas across its territory, or more than 10 percent of Europe’s demand for the fuel, making it a linchpin in the continent’s energy security.

While no deal was signed after the negotiations, Novak said there was no pricing disagreement between Russia and Ukraine and that Moscow-based gas exporter Gazprom PJSC is ready to supply its Kiev-based counterpart Naftogaz under the current deal. Gazprom’s deputy chief executive officer Alexander Medvedev was also present during the talks in Brussels.

“Naftogaz and Gazprom will continue consultations on gas supplies and we confirm that Russia is ready to ensure stable supplies to Ukraine and to the European consumers within existing contracts," Novak told reporters after the talks ended.

Ukraine has coped without purchasing from Gazprom for a year, the longest it has gone without supplies via Russia since the collapse of the Soviet Union. While gas transit westward continues, the 28-nation EU has signaled it needs a guarantee that flows will remain safe.

According to Russia’s Novak, Ukraine is ready to buy an additional 1.5 billion to 4 billion cubic meters of gas in the winter period as its stocks in storage may not be enough when temperatures fall. While that volume was discussed, Aliona Osmolovska, a spokeswoman for Ukraine’s Naftogaz, disputed that Ukraine was ready to buy and said that it was only one option. 

The amount is equivalent to $270 million to $840 million at prices Ukraine sees for the Russian gas in the fourth and the first quarters.

Naftogaz said on Monday that it had around 13.7 billion cubic meters of gas in storage and expected “a little bit less than 8 billion” will be left at the end of the winter period. While purchases from Russia are halted, the country gets the fuel via reverse purchases from neighboring EU countries.

“We haven’t signed anything today,” Chief Executive Officer Andriy Kobolyev told reporters after the talks in Brussels. His company said on Twitter that a supplementary agreement was key to remove the risk for Ukraine.

No Agreement

Ukraine can’t buy Russian gas without a supplementary agreement related to payment terms, Naftogaz’s Osmolovska said after the meeting. Russia won’t sign the supplementary agreement, she said.

Ukraine will guarantee stable transit of gas to Europe, Osmolovska said.

Naftogaz and Gazprom are waiting for a court verdict on their pricing dispute. The companies filed claims against each other in an international arbitration demanding roughly $30 billion each over their gas supply and transit contracts in effect through 2019.

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