FT Interview with
Hryhoriy Nemyria
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Ukraine Rejects Gas Theft Claim and Calls on EU
05 January 2009
Published in
Inform
issue #98
See the full issue here.
Ukraine’s state-owned gas company, Naftohaz Ukrainy, has denied Russian accusations that it is stealing gas. However, a presidential aide gave a stark warning on Saturday that gas supplies to Europe could be impacted in two weeks time unless the dispute is resolved. In the meantime, Yuriy Prodan, Ukraine’s Minister for Energy, has led a delegation to EU states to explain Ukraine’s position, while President Viktor Yushchenko and Prime Minister Yulia Tymoshenko have invited the European Union (EU) to mediate in the dispute with Gazprom.
The supply of natural gas from Russia to Ukraine was cut off at 0700 hours GMT on Thursday, 1 January, after talks collapsed over the alleged non-payment of a debt and failure to agree a gas price for 2009. The central issues concern a demand by Gazprom to pay an alleged debt of $2 billion. Naftohaz said that it had paid $1.5 billion to the Swiss intermediary company, RosUkrEnergo, that supplies Central Asian gas to Ukraine. But Gazprom is insisting on a further payment of $500 million for alleged late payment fees, the validity of which Naftohaz disputes and has stated its willingness to take to a court of arbitration.
The other major bone of contention is the failure to agree a gas price for 2009 and the fees Ukraine wants to charge for transporting Russian gas to Europe. About 80 percent of Russian gas exported to Europe is transported through Ukraine’s ageing gas pipeline network. Currently, Gazprom enjoys a cut-price transport fee which is three-times below the market rate. Gazprom pays Ukraine $1.70 to transport 1,000 cubic meters of gas per 100 kilometres (62 miles) and has insisted on keeping the price unchanged. In a joint letter to Gazprom, Ukraine’s president and premier pointed out that the current fee is inadequate to fund the maintenance of the pipeline network.
See the full issue here.
Ukraine’s state-owned gas company, Naftohaz Ukrainy, has denied Russian accusations that it is stealing gas. However, a presidential aide gave a stark warning on Saturday that gas supplies to Europe could be impacted in two weeks time unless the dispute is resolved. In the meantime, Yuriy Prodan, Ukraine’s Minister for Energy, has led a delegation to EU states to explain Ukraine’s position, while President Viktor Yushchenko and Prime Minister Yulia Tymoshenko have invited the European Union (EU) to mediate in the dispute with Gazprom.
The supply of natural gas from Russia to Ukraine was cut off at 0700 hours GMT on Thursday, 1 January, after talks collapsed over the alleged non-payment of a debt and failure to agree a gas price for 2009. The central issues concern a demand by Gazprom to pay an alleged debt of $2 billion. Naftohaz said that it had paid $1.5 billion to the Swiss intermediary company, RosUkrEnergo, that supplies Central Asian gas to Ukraine. But Gazprom is insisting on a further payment of $500 million for alleged late payment fees, the validity of which Naftohaz disputes and has stated its willingness to take to a court of arbitration.
The other major bone of contention is the failure to agree a gas price for 2009 and the fees Ukraine wants to charge for transporting Russian gas to Europe. About 80 percent of Russian gas exported to Europe is transported through Ukraine’s ageing gas pipeline network. Currently, Gazprom enjoys a cut-price transport fee which is three-times below the market rate. Gazprom pays Ukraine $1.70 to transport 1,000 cubic meters of gas per 100 kilometres (62 miles) and has insisted on keeping the price unchanged. In a joint letter to Gazprom, Ukraine’s president and premier pointed out that the current fee is inadequate to fund the maintenance of the pipeline network.
No Contract, No Gas!
According to Gazprom’s Chairman, Alexei Miller, “as far as gas to Ukraine is concerned we have no signed contract and so no legal basis to supply gas to them.”
Gazprom offered Ukraine a 2009 gas price of $250 per thousand cubic metres, which amounts to a 40 percent hike over the 2008 price of $179.50 per thousand cubic metres. Ukraine rejected this figure, stating that $201 would be more appropriate.
Gazprom reduced its offer to $235 per thousand cubic metres but has since dug in its heels, maintaining that Ukraine pay a market price of $418. But the price of gas is set to fall. Its price is linked to, but lags behind, the price of oil which has dropped three-fold since the summer.
“Ukraine is open to negotiation not intimidation,” said Hryhoriy Nemyria, Deputy Prime Minister responsible for European integration, “and will do its utmost to guarantee no disruption in supply to our European neighbours.”
However, President Yushchenko’s envoy on energy security, Bohdan Sokolovsky, warned that although Ukraine will continue to ship gas to Europe, disruptions may occur in “10 to 15 days” unless Ukraine’s gas is pumped along with supplies to Europe. Maintaining pressure in the pipeline system is essential to continue deliveries.
Gas is Not Being Stolen
Naftohaz officials strenuously rejected Russian claims that gas meant for Europe was being stolen. Valentyn Zemlianskyi, Naftohaz’s press spokesperson, said, “We are removing gas for technical purposes, in order to ensure the transit of Russian exports." Once again, this to ensure Naftohaz maintains the correct pressure in the pipeline network.
On Saturday, a Naftohaz official confirmed that Russia had actually reduced the amount of gas being shipped to Europe through Ukraine’s pipelines by 21 million cubic metres a day to 284.5 million cubic metres.
The European Commission is monitoring the dispute very closely with the Czech presidency saying it would call a crisis meeting of envoys in Brussels on Monday.
Despite a major lobbying exercise and PR campaign to explain its actions, Gazprom has once again drawn considerable flak from the international community over its willingness to resort quickly to strong-arm tactics.
Tammy Lynch, a Senior Fellow at Boston University’s Institute for the Study of Conflict, Ideology and Policy, writing for the Huffington Post, said: “forcing Ukraine to negotiate under the distress of having its gas turned off is a tactic that smacks of blackmail and intimidation.”
Naftohaz officials have estimated that Ukraine has about 90 days worth of gas stored to see it through the crisis.
According to Gazprom’s Chairman, Alexei Miller, “as far as gas to Ukraine is concerned we have no signed contract and so no legal basis to supply gas to them.”
Gazprom offered Ukraine a 2009 gas price of $250 per thousand cubic metres, which amounts to a 40 percent hike over the 2008 price of $179.50 per thousand cubic metres. Ukraine rejected this figure, stating that $201 would be more appropriate.
Gazprom reduced its offer to $235 per thousand cubic metres but has since dug in its heels, maintaining that Ukraine pay a market price of $418. But the price of gas is set to fall. Its price is linked to, but lags behind, the price of oil which has dropped three-fold since the summer.
“Ukraine is open to negotiation not intimidation,” said Hryhoriy Nemyria, Deputy Prime Minister responsible for European integration, “and will do its utmost to guarantee no disruption in supply to our European neighbours.”
However, President Yushchenko’s envoy on energy security, Bohdan Sokolovsky, warned that although Ukraine will continue to ship gas to Europe, disruptions may occur in “10 to 15 days” unless Ukraine’s gas is pumped along with supplies to Europe. Maintaining pressure in the pipeline system is essential to continue deliveries.
Gas is Not Being Stolen
Naftohaz officials strenuously rejected Russian claims that gas meant for Europe was being stolen. Valentyn Zemlianskyi, Naftohaz’s press spokesperson, said, “We are removing gas for technical purposes, in order to ensure the transit of Russian exports." Once again, this to ensure Naftohaz maintains the correct pressure in the pipeline network.
On Saturday, a Naftohaz official confirmed that Russia had actually reduced the amount of gas being shipped to Europe through Ukraine’s pipelines by 21 million cubic metres a day to 284.5 million cubic metres.
The European Commission is monitoring the dispute very closely with the Czech presidency saying it would call a crisis meeting of envoys in Brussels on Monday.
Despite a major lobbying exercise and PR campaign to explain its actions, Gazprom has once again drawn considerable flak from the international community over its willingness to resort quickly to strong-arm tactics.
Tammy Lynch, a Senior Fellow at Boston University’s Institute for the Study of Conflict, Ideology and Policy, writing for the Huffington Post, said: “forcing Ukraine to negotiate under the distress of having its gas turned off is a tactic that smacks of blackmail and intimidation.”
Naftohaz officials have estimated that Ukraine has about 90 days worth of gas stored to see it through the crisis.