Brussels, 26/09/2014 (Agence Europe) - Under the mediation of European Commissioner for Energy Günther Oettinger, the Russian and Ukrainian energy ministers - Alexander Novak and Yuriy Prodan respectively - agreed on a package of measures in Berlin on Friday 26 September to restore flows of Russian gas to Ukraine until April 2015. The gas flows were suspended in mid-June.
This provisional agreement - which has to be approved by the Ukrainian and Russian governments - is partly based on Kiev's payment of some of its debt to Russian gas company Gazprom. The payment will be made in two instalments totalling $3.1 billion by the end of 2014. The first instalment of $2 billion is due to be paid by the end of October, and the second instalment of $1.1 billion by the end of December.
The agreement is also based on Gazprom's delivery of at least 5 billion cubic metres of gas to Ukraine in the next six months, with Kiev paying in advance at a price of $385 per 1,000 cubic metres. This is a rate $100 below that which Gazprom wanted to impose the day after former Ukrainian president Viktor Yanukoych was deposed - but it is clearly above the price charged before the change of government in Ukraine ($268).
“We have negotiated a plan for a winter package in several points today”, which should mean that Ukraine, and all the European countries for which deliveries of gas transit Ukraine, do not find themselves in a situation of shortage in the next six months, said Oettinger. “We have a tangible interim solution to secure supply until the spring”, he said. Another trilateral meeting is planned in Berlin at the end of next week in order to ratify this agreement, said Oettinger.
“We have prepared a plan for winter which should serve as a basis for resolving the problems”, said Novak. “Unfortunately, we have not been able to reach a total solution”, regretted Prodan.
Novak and Prodan, who negotiated separately with Oettinger before the trilateral meeting, gave separate reports of the results of the meeting to the press, and their interpretations of the provisional agreement are reportedly slightly different. Prodan therefore warned that Kiev would only pay the $3.1 billion promised if Gazprom committed on its deliveries during the winter.
The $3.1 million in question corresponds to what Ukraine believes to be its debt - whilst Gazprom is claiming $5.3 billion. Ukraine and Russia have both taken the dispute to the international arbitration court in Stockholm - but the court is not expected to give its verdict for several months. Depending on the outcome of this court case, Ukraine may or may not have to complete the payment that it commits to making.
Hungary called to order on gas reverse flows to Ukraine
In response to the decision of Hungarian gas operator FGSZ to suspend its gas deliveries to Ukraine, the European Commission called Hungary to order on Friday 26 September as regards its commitment to supply Ukraine through reverse flows.
“The message from the Commission is very clear. We expect all member states to facilitate reverse flows as agreed by the European Council, in the interest of a shared energy security. There is nothing preventing EU companies to dispose freely of gas they have purchased from Gazprom and this includes selling this gas to customers both within the EU as well as to third countries such as Ukraine”, a Commission spokesperson stated on Friday lunchtime.
Earlier in the day, Hungary justified the suspension of its reverse flow deliveries of gas to Ukraine - which started on Thursday evening for an undetermined length of time - by the need to increase its stocks. The constitution of minimum stocks is also a Community level requirement.
With an annual gas consumption of 9 billion cubic metres and an annual national production of only 1.5 cubic metres, Hungary is very dependent on Russian gas - for which most of its deliveries transit Ukraine. Hungarian storage capacity is 6 billion cubic metres and is currently around 61% full, according to data from Gas Infrastructure Europe.
The Hungarian decision came the day after a meeting between Hungary's Prime Minister Viktor Orban and the head of Russian gas company Gazprom, Alexei Miller, on 22 September. On Friday, Orban stated on Hungarian radio that Gazprom had agreed to increase its volumes of gas to Hungary so that Hungary might step up its stocks.
Hungary's decision has provoked protest from Ukrainian gas company Naftogaz, which has urged its Hungarian partner to respect its contractual obligations and EU legislation. “Naftogaz calls on the EU to ensure a collective solution to the energy security of Europe and the respect of EU internal rules. Neither EU countries nor Ukraine should be put under political pressure through energy blackmail”, Naftogaz said in a press release on Friday.
Questioned on this issue at the end of the Russia-Ukraine-EU trilateral meeting on Friday afternoon, European Commissioner for Energy Günther Oettinger simply said that Hungary had warned Ukraine that it could not supply Ukraine for technical reasons. (EH)