Gazprom will not re-examine the contract with Ukraine – expert

2014/06/06 • News

A temporary ceasefire and the calculation of the price until the end of 2015, at most, can become a compromise in the gas talks between Ukraine and Russia. This opinion was stated in an interview to Radio Svoboda by an expert in questions of fuel Yuriy Korolchuk. According to him, this price will be no lower than 370 USD per thousand cubic metres. Russian Gazprom is unlikely to agree to a change of contracts until 2019, when their term runs out. 

Gazprom stated that it is beginning the elimination of the company ‘RosUkrEnergo.’ This company used to be the mediator between Gazprom and Naftogaz in supplying Russian fuel to Ukraine. What does this decision mean now, in particular regarding energy relations between Ukraine and Russia? 

The issue of eliminating ‘RosUkrEnergo’ was raised earlier. This company has already played its historical part, having been the mediator in gas relations between Ukraine and Russia for some time. However, after 2012, when ‘RosUkrEnergo’ sued ‘Naftogaz’ for almost 12 billion cubic metres of gas and sold it on EU markets, it practically ceased to exist. At the moment another issue remains – this is the distribution of the revenues between Gazprom and Dmytro Firtash. After this Gazprom will begin to liquidate the company. In the current Ukrainian-Russian talks, this would be a symbolic gesture that the epoch of mediators has passed and relations between industrial subjects have to be built on commercial bases.

Some experts express their fears that within the new Ukrainian-Russian gas agreements, a new mediator company may appear. Do you agree with this? 

Such a possibility does exist .We have seen that both in 2012 and 2013 the company Ostchem, which belongs to Dmytro Firtash, de facto played the role of such a mediator. It bought gas and supplied it to the Ukrainian market, first and foremost, for its chemical productions, and also sold it to other consumers. Therefore, if Russia is to once more find common ground with Firtash, then, it goes without saying that we may once more see a mediator of sorts. But these quantities won’t be big, therefore we cannot speak of the appearance of a new trader akin to ‘RosUkrEnergo.’

Petro Poroshenko, back when he was a candidate for President, met with Dmytro Firtash in Vienna. Could there have been any agreements in regard to gas? 

It should be said that Petro Poroshenko, as the newly-elected President, will have to lean on groups of people that have significant experience in this, both in conducting talks with Gazprom and in solving the current internal gas issues in Ukraine. And Dmytro Firtash is one of these key characters in Ukrainian gas politics. Practically two-thirds of the supply market of gas to consumers belong to him – these are regional gas companies. A significant part of chemical production facilities that consume gas belong to him, he also engages in gas extraction. Therefore his meeting with Poroshenko was market even by the fact that he is one of the subjects of gas politics in Ukraine on which, possibly, Poroshenko will have to if not lean, then account for, as participants of the political and gas process in Ukraine.

At the moment, during talks with Gazprom, the representatives of Naftogaz are talking about some package deal. What could this deal be and can any dangers be part of this package? 

At the moment it can be said that on Ukraine’s part there is a proposal to lower the gas price, take away the condition “take it or pay,” and also to agree regarding the possibility of conducting re-export of Russian gas. This could be deemed a package deal, but at the moment Ukraine cannot achieve this practically. The EU is inciting Ukraine to comply with the conditions of the contract, so pay the current debts and only after this can they start working on the key issue – the calculation of price, for which gas starting June and until the end of 2014 or possibly 2015 will be supplied.

As far as I understand, the full re-examination of gas contracts of 2019 is improbable in the nearest future, as there is also pressure from Europe. What may the short-term compromise be? 

In reality now we can speak about the short-term interim period. The price must be calculated within April and May. As far as I know, Russia is agreeing to a price of 370 USD per thousand cubic metres. And starting June Ukraine will buy gas on approximately the same price, but not lower. The key issue here is that Gazprom will not re-examine the contract itself, it may make amendments, it may lower the price based on some allowances on Ukraine’s part, some steps towards compromise.

So Russia will not agree to change the contracts until 2019? 

Unfortunately, yes. Therefore Ukraine’s position is very strange. First it took a strong line, having stated that it will petition with the Stockholm Court if Russia does not want to re-examine the contract. But we can see that Ukraine’s position now is softer, they are practically talking about refusing these intentions. And this is not very good, because in case a temporary ceasefire is reached with Russia for 2014-2015, we cannot guarantee that the gas war will not repeat itself in another 2 years, or that we will not have problems with paying for Russian gas again. And then it will be too late to go to court, as this process takes up a minimum of 2 years.

Source: Radio Svoboda 

Translated by Mariya Shcherbinina

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