April 12, 2014 16:36
Ukraine refuses to pay gas debt to Russia if price rises
KYIV. April 12 (Interfax) - Ukraine is willing to pay off its natural gas arrears to Russia if the latter reverses its decision to substantially raise the price for its gas, said the chief executive of Ukrainian state-owned oil and gas company Naftogaz.
Ukraine suspended payments for Russian gas for the period of talks in which it is pressing Russian gas monopoly Gazprom (MOEX: GAZP) to go back on its decision to put up the price, Andriy Kobolev told Ukrainian weekly Dzerkalo Tyzhnya (Zn.ua).
"We are continuing our negotiations with Gazprom about the price that would be charged as from April 1, 2014. Under the terms of the contract, we have put forward an official proposal for keeping the price at $268.5 per 1,000 cubic meters. We've had no response yet," Kobolev said.
He said that neither Naftogaz nor Gazprom had ever described the $268.5 price, which was charged in the first quarter of this year, as "political," and that this meant there are no market factors to justify a raise.
"As of April 1, the debt for gas acquired by [Naftogaz] amounted to $2.2 billion," Kobolev said. "In the course of our negotiations with Alexei Borisovich [Gazprom chief executive Alexei Miller], we have clearly stated the Ukrainian position that the payment of the debt that has been accumulated is directly linked to keeping the natural gas price at the level of the first quarter of this year."
"We can see no reason to revise it, and we believe that the amount close to $500 that has been suggested by the Russian side is a non-market, groundless and unacceptable price. Consequently, we have suspended our payments for the period of the negotiations," Kobolev said.
He expressed hope that the Russian side would put economic considerations above political ones because Ukraine is one of Europe's largest gas markets and losing it would be painful for Gazprom.
He also claimed that, given the relatively small amount of Russian gas transmitted to Europe through Ukrainian territory, Ukraine's transit charge is too low. The current charge would only make sense if the Ukrainian pipelines were used to capacity and cost relatively little to operate, he argued.
"The reality is that our gas pipeline system is only running at half capacity at the moment, and its cost of financing is very high. This means that the charge should be a lot higher," he said.
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