Skip Navigation LinksHome|News & Analysis|News Features|News Feature Detail

Top Image

Ukraine rejects Russia's gas price discount, seeks to amend contract

By Alexander Bor in Kiev

June 11, 2014 - Ukraine has rejected a natural gas price discount of $100/1,000 cubic meters offered by Russia and insists on making amendments to the current gas contract, Prime Minister Arseniy Yatseniuk said June 11.

"Our position remains unchanged: [make] amendments to the contract," Yatseniuk said in a statement, released by the government's press service. "We know these Russian tricks -- a discount is set by a Russian government decision and is rescinded by a Russian government decision."

Trilateral gas talks between Russia, Ukraine and the European Commission resumed on June 11 after ffailing to reach a deal earlier this week.

Ukraine wants to amend a 10-year gas agreement with Russia that had been signed in January 2009, as it sets Russian gas prices for Ukraine at a higher level compared with consumers in other European countries.

Analysis continues below...

Request a free trial of: European Gas Daily European Gas Daily
European Gas Daily

European Gas Daily is a flagship Platts publication that delivers crucial competitive intelligence across the entire European gas marketplace. It keeps you ahead of critical price changes and their effects on the industry -- to help you make informed market decisions.

Request a trial to European Gas Daily Request More Information

Platts European Gas Summit 2014
September 29-30, Berlin, Germany

Platts European Gas Summit 2014
Platts European Gas Summit 2014 Platts European Gas Summit will return for its 8th consecutive year on September 29-30 to Berlin, Germany. This key fixture in the European Gas industry calendar has now been extended to 2 full days and will provide a platform for the Europe's leading gas companies, TSOs, regulatory bodies, industry associations, traders and analysts to network, discuss and debate the future of an industry experiencing significant challenges and changes over the coming year.
Register for Platts European Gas Summit 2014

After popular protests toppled a pro-Moscow Ukrainian president in February, the Russian government canceled two previous gas price discounts, increasing the price on gas supplies to Ukraine to $485/1,000 cu m on April 1 from $268.50/1,000 cu m.

Ukraine argued the price hike was politically motivated and threatened to file a lawsuit in the court of arbitration in Stockholm to force Russian gas giant Gazprom to lower the price back to market levels.

"If gas is a political weapon then it is clear that this political weapon is in the hands of the Russian government," Yatseniuk said. "If gas, like everywhere in the world, is a commodity then we should trade based on the contract, not based on whether the Russian government likes the Ukrainian government or not."

Russia had threatened to cut gas supplies to Ukraine early June 11, but later pushed back the gas cut deadline until June 16 to give the parties more time to settle the gas price and debt dispute.

Any disruption of gas supplies to Ukraine could have marked knock-on effects for EU supplies.

Yatseniuk again warned Russia that if the talks fail to bring lower gas prices, Naftogaz Ukrayiny, the national energy company, will sue Gazprom.

"Once again I appeal to Russia -- let's sign [the amendments to the] agreement to avoid taking this case to court," Yatseniuk said.

Ukraine stepped up imports of natural gas over the past two months to replenish gas stocks in its underground storage facilities amid fears that Russian gas supplies may be disrupted in June.

Ukraine accumulated 13.4 billion cu m of natural gas in its storage facilities as of June 11, Yatseniuk said.

Ukraine needs at least 20 Bcm of gas kept in the storage facilities as of October 15 in order to be able to secure steady transportation of gas from Russia to Europe during the high demand season, which runs for six months from October 15 through April 15.

Next article -Ukraine to sue Gazprom imminently unless gas price, debt deal reached

Stay connected with Platts