Gazprom demands Ukraine pay $11.4 bn before EU gas talks


Gazprom demands Ukraine pay $11.4 bn before EU gas talks


MOSCOW (Bloomberg) -- OAO Gazprom charged Ukraine $11.4 bn for contracted fuel last year as the smaller country seeks the European Union’s support to cut reliance on Russian imports.

Gazprom sent the bill to NAK Naftogaz Ukrainy yesterday, Sergei Kupriyanov, the Russian state-run gas exporter’s spokesman, said today by phone in Moscow. Ukraine owes a total $18.4 bn in take-or-pay fines for amounts the Ukrainian side failed to accept since their contract was signed in 2009, President Vladimir Putin said earlier this month.

Ukraine is seeking alternative energy supplies to cut dependence on Russia amid accusations that President Vladimir Putin uses energy exports as a political tool. Ukraine gets about half of its gas from Russia and is the transit route for about 15% of Europe’s annual consumption of the fuel, making energy a central issue as tensions with Russia rise.

“Russia is clearly whipping up tension before Ukraine’s talk with Europe, understanding that Naftogaz won’t pay,” Bohdan Sokolovskyi, an energy adviser to former Ukrainian President Viktor Yushchenko, said by phone. “Under the contract, Gazprom truly has the right to demand $11.4 bn. The other issue is the contract was unfair.”

EU representatives are planning gas talks with Ukrainian and Slovakian officials today, a European Commission official said by email yesterday, asking not to be identified in line with policy rules. Ukraine aimed to use EU-bound pipelines in a so-called reverse mode to supply its domestic needs. The date of negotiations involving Russia hasn’t been set yet, the EC official said.

Gazprom and Naftogaz signed the 2009 gas supply agreement to end a pricing dispute that had led Russia to halt deliveries to Ukraine, which disrupted transit flows to Europe for about two weeks during freezing weather.

Naftogaz was obliged to buy at least 41.6 Bcm of Russian gas last year under the contract, whether or not they took the volumes, according to Gazprom. Naftogaz imported 12.9 Bcm of the fuel, Aliona Osmolovska, a spokeswoman for the Ukrainian company, said by phone from Kiev, declining to comment on the bill.

In January 2013, Gazprom charged Ukraine $7 bn for fuel that Naftogaz had to pay for under a take-or-pay clause in 2012. The bill wasn’t paid, and Ukraine won a discount on gas prices in December, a month after then-President Viktor Yanukovych pulled out of a European Union cooperation accord, favoring ties with Russia. Yanukovych’s decision kicked off protests that led to his ouster this year, souring Ukraine-Russia relations.

Russia has provided Ukraine’s economy with $35.4 bn of subsidies in the past four years, including $17 bn in gas-price subsidies and $18.4 bn in the form of a a take-or-pay fine for contracted amounts the Ukrainian side failed to buy, Putin wrote April 10 in a letter to 18 European heads. The document isn’t a demand for Ukraine to repay this sum, the Kremlin spokesman Dmitry Peskov said the next day.

Before today, Russia had been pressuring Ukraine to settle its more than $2.2 bn debt for imported gas last year and in the first quarter of 2014. Gazprom will demand Ukraine pay in advance for natural-gas deliveries in a month unless its neighbor resumes payments, a move that may lead to disruptions in fuel supplies to Europe, Putin said in a televised call-in show on April 17.

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