Ukraine refuses to buy Russian gas in 3Q15 on new conditions

Макроэкономика 01.07.2015 The Ukrainian government has no intention to buy Russian natural gas for USD 247/tcm in 3Q15, Energy Minister Andriy Demchyshyn stated on June 30, according to an Interfax report. Demchyshyn clarified that Ukraine was expecting for the Russian gas price to account for a maximum possible discount of 30%. With such a discount, Russian gas would have been priced at USD 201/tcm. Ukraine’s state gas production and transit firm Naftogaz reported the same day that it has stopped buying Russian gas as of July as an interim contract with the Russian side is expiring and the sides have failed to agree on the terms of a new deal at their meeting in Vienna. Recall a day before, the Russian government resolved to give a USD 40/tcm discount for Gazprom’s gas supplied to Ukraine in 3Q15. The discount was “granted” by reducing export duty to 16% (USD 46/tcm) from 30% (USD 86/tcm). During the last five years, the Russian government charged no export duty for gas that was supplied by Gazprom to Ukraine’s Naftogaz. No gas deal was reached in a June 30 trilateral meeting between the energy ministers of Ukraine and Russia, with the mediation of the EU, the negotiating sides confirmed afterwards. “As the meeting has shown today, the parties are still far apart,” the Ukrinform news agency reported, citing European Commission Vice President Maros Sefcovic. He said the parties have agreed that the Commission will suggest the next steps that will be considered at future meetings. The new talks could occur in late August or September, as can be understood from the statements. Alexander Paraschiy: The Russian government’s intention to charge USD 46 in duties per each tcm of gas supplied to Ukraine is hard to accept for the Ukrainian government for political reasons. The idea of Ukrainian gas consumers directly financing the aggressor state’s budget looks to be a provocation, so Ukraine’s refusal is in line with our expectations. Now that the parties expressed their intention to come back to their talks in the end of August, at the earliest, it seems like we will see a repetition of the last year’s saga, when an interim gas deal between Ukraine and Russia was signed in late October.