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Gazprom bills Ukraine $1.7 bn as June deadline looms

ELENA MAZNEVA

MOSCOW (Bloomberg) -- Gazprom sent Ukraine a bill for an estimated $1.7 bn of imports next month, saying it will cut off supplies if the neighboring country doesn’t start paying in advance.

Ukraine’s June bill was based on average deliveries of 114 million cubic meters a day, at the second quarter price of $485 per 1,000 cubic meters, Sergei Kupriyanov, a spokesman for Gazprom in Moscow, said on May 13.

Payment is due by June 2, and starting from the following day, Ukraine will only get what it pays for, Kupriyanov said.

“Russia is to stop to use natural gas as a new type of Russian weapon,” Ukrainian Prime Minister Arseniy Yatsenyuk said on May 13 in Brussels. “We are ready for the market-based approach.”

Ukraine depends on Russia for about half its gas, making energy a battleground in the wider struggle between the two countries. Because 15% of the European Union’s gas passes through the Ukrainian pipeline network, a cutoff could disrupt shipments to the rest of the region.

Gazprom’s demands are a “premature signal,” Vygaudas Usackas, head of the EU delegation to Russia, said in an interview on Bloomberg Television on May 13. The EU is “eager” to work with Russia to calm the Ukraine crisis, he said.

Russia’s relations with the U.S. and EU have sunk to the lowest since the fall of the Iron Curtain. They have backed the Ukrainian government in accusing Russia of fomenting unrest in the country before a presidential election on May 25.

Ukraine has the ability to pay off at least part of its debt after receiving the first $3.2 bn of a $17 bn International Monetary Fund aid package last week, Russian Prime Minister Dmitry Medvedev said on May 12.

He ordered Gazprom to send Ukraine a June bill, as the company claims $3.51 bn in overdue payments for fuel delivered in 2013 and through April. NAK Naftogaz Ukrainy doesn’t recognize the full debt.

Ukraine has been boosting imports of Russian gas since April 17, the day Russian President Vladimir Putin first warned of the impending move to prepayments and possible disruptions in fuel supplies to Europe.

The smaller country imported the most Russian gas since February on May 11, according to the Energy Ministry in Moscow. Imports are running at more than four times the average for the same time last year as the June deadline approaches.

Naftogaz has received Gazprom’s invoice, Aliona Osmolovska, a spokeswoman for the company, said by phone from Kiev without elaborating.

Ukraine refuses to prepay for Russian gas at the second quarter price of $485, Energy Minister Yuri Prodan said last week in Kiev.

If Gazprom returns the first-quarter price for gas to $268.5, “Ukraine in 10 days will urgently repay gas bill arrears,” Yatsenyuk said. “But first, we need to sign the deal, and only afterwards ask for arrears.”

Russian EU, and Ukrainian energy officials met on May 12 in Brussels to agree on the timing and place for their next round of three way gas talks after meeting in Warsaw on May 2 without reaching an agreement.

“Our delegation is still in Brussels,” Osmolovska said. “We expect that an official statement will be made after they come back tomorrow.”

The gas conflict may intensify as Ukraine prepares for the May 25 election, which Russia has opposed, saying the country should first carry out constitutional reforms and provide more autonomy to its regions.

“Gazprom simply can’t reach an agreement with Ukraine,” billionaire Dmitry Firtash, who made his fortune importing gas to the country with the Russian company, said in an interview in Vienna. “That is because Gazprom’s business is politics.”

05/14/2014

 

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