EU Can’t Broker Russia-Ukraine Gas Deal Yet

The window of opportunity to avoid another gas crisis narrowed on 19 May as the European Union held “constructive” talks to resolve arow between Russia and Ukraine over gas prices by 1 June but failed to reach an agreement.

EU Energy Commissioner Günther Oettinger said the three parties will have a second round of gas talks on 26 May. He has offered Germany’s capital Berlin as a venue for talks. Ukraine holds presidential elections on 25 May.

Oettinger, Russian Energy Minister Alexander Novak and Ukrainian Energy Minister Yuriy Prodan held first trilateral exchange of views dedicated to security of gas supply and transit from Russia via the Ukraine to the EU in Warsaw on 19 May.

They discussed how to best ensure continued gas supplies and transit including concerns about the outstanding debt of Ukraine and the gas price for supplies to Ukraine. They also discussed methods to increase transparency and reliability of gas flows and gas storage as well as ways to ensure the modernisation of the Ukrainian gas market and the gas transmission system, the Commission said in a statement.

“Despite differences in views both Ukraine and Russia showed a willingness to discuss further open questions. The parties recognised the value of these trilateral discussions and agreed that today’s meeting is the first step in a process aimed at ensuring gas supply to the Ukraine and the EU, both in the short- and in the long-term,” the statement said.

Russia has warned that it will not supply Ukraine with gas inJune unless Kiev pays inadvance $1.66 billion by2 June.

But the Commission statement said that “it has been confirmed by all sides that – as long as trilateral talks are on-going - gas flows will not be interrupted”.

For its part, Russian gas monopoly Gazprom CEO Alexei Miller assured European customers it would continue tosupply their gas. Any shortfall would be thefault ofUkraine, Rossia 24 television quoted Miller as saying.

“Gazprom will simply supply Ukraine as much as gas as it will have bought, andto theRussian border with Ukraine we will send as much gas as Europe should get andUkraine should transit,” Miller said.

“It would be our Ukrainian partners’ responsibility fora so-called unauthorised off-take. But Gazprom fromits part will do everything toensure that European customers have no problems,” Miller said.

In 2006 and 2009, Russia reduced gas supplies over price disputes that disrupted gas deliveries toEurope, which takes about half ofthe gas it imports fromRussia via pipelines through Ukraine.

Asked by New Europe if Ukraine would siphonoff transitgasfor its own use if Russia halts supplies totransit nation Ukraine next month over nonpayment, Ukraine’s Deputy Foreign Minister Natalia Galibarenko told a press conference at GLOBSEC 2014 in Bratislava on 15 May “that’s why we’re now in the process of trilateral negotiations - Ukraine, Russian Federation and the European Union”.

“Frankly, there’re not very tangible results right now from those talks because the parties only exchange their positions,” Galibarenko said, clad in theblueandyellow coloursof Ukraine’snationalflag.

She said that Ukraine views as “unreasonable” a sharp increase in gas prices for Ukraine.

In a December deal signed by Russian President Vladimir Putin and then Ukrainian president Viktor Yanukovych, Russia agreed to sell gas to Ukraine at a price of $268 for 1,000 cubic metres. Last month, after Yanukovych’s ouster, Gazprom raised the price to $385 for 1,000 cubic metres, the standard measure for gas in Europe.

Ukraine’s deputy Foreign Minister said Kiev wants to proceed with the same price or go to the Stockholm Court to discuss and resolve this issue.

Being in Bratislava, she said, had special significance since Slovakia had agreed to allow reverse flows of gas to Ukraine from Europe. “Due to the support of the Slovakian side, we will be able to even partly feel some gas necessities for Ukraine,” she said.

Meanwhile, Gazprom has spearheaded the construction of the South Stream gas pipeline, aiming to diversify gas routes within the EU and to provide stable gas supplies from Russia to central and southern Europe. The offshore section of the pipeline is to pass through the economic zones of Russia, Turkey and Bulgaria.

On 16 May, Dutch-based South Stream Transport BV, a joint venture established for the planning, construction and operation of the Black Sea section of the facility, saidthe construction of the first line of the offshore section of South Stream is set to start in the autumn. Intergovernmental agreements have been signed with Bulgaria, Serbia, Hungary, Greece, Slovenia, Austria and Croatia in order to implement the onshore gas pipeline section. But the European Commission has warned that the agreements may have to be renegotiated if they do not comply with the EU’s third energy package.

The offshore section of the South Stream pipeline will be made up of four parallel pipelines of 931 kilometres each. South Stream is planned to go live by the end of 2015 with a pipeline capacity of some 63 billion cubic metres per year.