The Russian economy and gas monopoly Gazprom will take a hit if Ukraine, which is facing growing unrest, fails to pay its already reduced gas bill, Russian President Vladimir Putin said on 28 January.
The Russian leader, who was speaking during a news conference in Brussels after a European Union-Russia summit, reminded that Gazprom reduced the price of gas to help alleviate Ukraine’s debt which has reached $2.7 billion.
“We’re trying to reduce this debt by reducing gas prices and by deferring payments and the Ukrainian government has in fact asked for deferred payments and this is probably not the worse part of what’s happening. It was just this morning that I was advised that Ukraine is asking for a deferral on the amounts due this year on already reduced prices,” Putin said. “This would be a major challenge for our economy and for Gazprom because this particular revenue stream is already booked for potential investment,” Putin said, addressing reporters with European Council President Herman Van Rompuy and European Commission head Jose ManuelBarroso.
Alexei Kokin, a senioroil and gas analyst at UralSibFinancial Corp, told New Europe from Moscow that gas is only part of the political problem involving Ukraine because of the discount that Gazprom has to pay for essentially to subsidize supplies to the former Soviet republic. “Gazprom’s expectations of a much higher volume to Ukraine than 2013 that’s probably to some degree influenced by political consideration, he said.
At the press conference, Putin stressed that no matter who becomes the new Ukrainian prime minister, the Russian government plans to address those issues with them. He also said that Russia will not revise thearrangement on the $15-billion in loans andenergy discounts if the Ukrainianopposition comes to power.
“It’s not important to us because we had a very constructive dialoguewith the Ukrainian government when this government was chaired by (former prime minister and jailed opposition leader) Mrs (Yulia) Timoshenko. We talked to her about everything and this is not a taboo subject for us – so we will talk to any government in Ukraine. But what is of principal importance for us is that the Ukrainian economy is credit worthy, that the Ukrainian economy is able to generate positive effects from its development, for the government to hold constructive changes, reforms so that we’re confident we will get this money back,” Putin said.
The Russian President also said that the EU and Russia have once again argued about the Third Energy Package. “We had problems with the Nord Stream’s extension, the OPAL pipeline in Germany, and we have agreed that 100% will be used, not 50% as before – we have movement even in the most difficult issues,” he said.
Both Putin and Barroso struck a conciliatory tone. Barroso highlighted the importance of the Third Energy Package for the EU. “On energy matters, I have explained once again to my Russian colleague how important the Third Energy Package is for us, that it’s not discriminatory, that we apply these rules for all companies in the world as we do to our European companies, to American companies so we try to avoid politicizing the issue,” Barroso said, adding that the EU has addressed Russia’s concerns and is committed through “pragmatic dialogue” to solve some of their concerns. He also referred to the OPAL pipeline as an example.
“But, at the same time, we have a different conception in what comes regarding the trade on energy and investment. But our conception is not discriminatory. In fact the Russian companies like Gazprom are acting in 20 of our Member States and they can also use the European instruments if they want against any kind of practice they believe is monopolistic or abusing the market,” the European Commission President said, indirectly referring to an EU antitrust probe regarding the Russian company’s pricing for gas sales in central and eastern Europe, that has soured relations.
Kokin noted that the big issue is the anti-monopoly investigation and its potential impact on Gazprom’s prices in Eastern Europe, mostly in Lithuania and Poland”. But he noted that this can probably be more or less negotiated between Gazprom and the European Commission. “I don’t really think Putin can contribute very much to this,” he said.