Ukraine wants cheaper gas, suggests EU buy gas on Russian border

Макроэкономика 14.04.2014 Ukraine is ready to pay all its bills for natural gas to Gazprom and start buying Russian natural gas for USD 385.5/tcm, National Bank of Ukraine Head Stepan Kubiv told the Russian agency Prime on April 13. Recall, Gazprom and the Russian government are claiming gas should cost USD 485.5/tcm for Ukraine in 2Q14, since the price cannot include a USD 100/tcm discount that the Ukrainian government received in exchange for a 25-year lease extension of the Russian Black Sea Fleet remaining in Crimea, which the Russians now allege is their territory. Andriy Kobolev, the CEO of national gas monopoly Naftogaz of Ukraine (NAFTO), told journalists that he sees a real threat of interrupted supplies of Russian gas to Europe through Ukraine’s territory, according to a ZN.UA report from April 12. “If politics takes dominance over the economy in the gas sector, such a threat is very high,” he said. He also explained how to avoid such a risk: “Either we agree with Gazprom on an unchanged price, or we will agree with European companies that they will buy gas from Gazprom and resell it to us, as well as paying us for the service of gas transit through Ukraine.” Naftogaz has already suggested to leading EU gas companies that they start negotiating with Gazprom on adopting a new approach of purchasing gas, on Russia’s western border, which would be pumped into Ukraine’s gas storage tanks and transported to EU countries, Kobolev said. At present, EU states are buying Russian gas on Ukraine’s western border or their own eastern borders. Alexander Paraschiy: Ukraine is starting to spin its own game in global gas politics, using its leverage as a core transit country to Europe and a key consumer of Russian gas. On the one side, Ukraine is trying to negotiate with Russia on a better gas price, identifying a lowered price as a precondition for Ukraine to not only start buying gas, but also repay the already accumulated debt for gas. To avoid a Russian corresponding move to stop payments for gas transit through Ukraine (which indeed may end up in a complete halt in transit), Naftogaz is proposing that European consumers start paying for the transit. In case Ukraine is able to persuade leading EU gas companies to start buying gas at the Ukraine-Russian border (at a price that for sure will be lower than USD 486/tcm), Naftogaz will have a powerful argument to demand that Russia charge a smaller price for Ukraine as well.