Gas Price for Ukraine Set at USD 485 per 1,000 Cubic Meters from April

Source: 4/3/2014, Location: Asia

A working meeting took place between Russian Prime Minister Dmitry Medvedev and Gazprom’s Management Committee Chairman Alexey Miller.

Alexey Miller informed Dmitry Medvedev that the situation with gas payment for natural gas supplied to Ukraine was worsening: the debt amount had upped to over USD 2.2 billion. Taking into account that the Russian Government abolished the zero customs duty on gas export for Ukraine, the gas price will make up USD 485 per 1,000 cubic meters from this April in strict compliance with the existing contract between Gazprom and Naftogaz of Ukraine.

Verbatim transcript of meeting

Dmitry Medvedev: Mr. Miller, some information to start with. You know that the Security Council Meeting addressed the future of the so-called Kharkiv Accords. As a result, the President ordered to consider denouncing the corresponding international treaties signed in 2010. The State Duma addressed this matter and, taking into account the change in circumstances, which actually were the background reasons for signing these treaties, the State Duma denounced the corresponding international documents.

The President endorsed a relevant law. In pursuance of this international treaty, the Russian Federation Government earlier adopted a separate document (dated April 30, 2010) regarding the rates of export customs duties for gas supply from the Russian Federation. This document fixed a zero per cent duty rate. But taking into account the failure to consider the international legal bases for the treaty as well as the denunciation of the treaty itself, I also resolve to overturn the Government Directive No.291 of April 30, 2010. This decision entails direct and immediate consequences for Gazprom in its further relations with our Ukrainian partners, with consumers. I expect you to adhere to the standard rates of gas export customs duties with no discounts or preferences. In fact, this decision is to be regarded in future settlement payments with Ukrainian consumers.

In the meantime, I would also like to draw your attention to an issue connected with compensations. Let me remind you that the decisions related to the well-known international accord allowed Ukraine – right after signing the documents and relevant contracts with Gazprom – to get a certain benefit from those international treaties. But in fact, the said benefit meant that the Russian Federation had lost a part of its revenues in the form of gas export customs duties. Moreover, the loss of those duties was made to a certain extent in the form of advanced payment, since the mentioned Kharkiv Accords prolonged the stay of the Russian naval base in what used to be Ukraine. That’s why currently we are looking into the possibility of taking the relevant compensation measures. We were tasked to do so in order to recover, according to the established procedure, the part of revenues lost by the Russian budget. I am informing you about this, so you bear this in mind in your relations with Ukrainian consumers.

How are things going on in general with gas supply to Ukraine? They were heavily indebted, has anything changed recently?

Alexey Miller: Ukraine received 1.956 billion cubic meters of gas in March and so far no payments have come for these supplies. The indebtedness increased to over USD 2.2 billion. We hope that in the near future Ukraine will start settling its debts and paying for current supplies, thought we see that the situation is not improving, but only getting worse.

The signing of a directive annulling the beneficial customs duty on gas export to Ukraine means, Mr. Medvedev, that in line with the existing contract for gas supply to Ukraine, dated 2009, the gas price will unconditionally go up and make up USD 485 per 1,000 cubic meters from April.

Dmitry Medvedev: I think our Ukrainian partners should raise the necessary funds to settle the debts and pay off the current bills. It’s the only way we can cooperate in this area just like in any other. Everyone should understand that, and the people who currently make the necessary decisions in Ukraine should understand this too.

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