Russia-Ukraine gas talks falter, new meeting next week

Ukraine's Energy and Coal Industry Minister Yuri Prodan (R) arrives at the European Commission headquarters for tri-lateral gas talks between Russia, Ukraine and the EU in Brussels. (Photo: AFP/Emmanuel Dunand)

BRUSSELS: EU-brokered crunch talks to resolve the bitter gas price dispute between Russia and Ukraine failed on Tuesday (Oct 21), as a new meeting was set for next week amid fears Moscow could halt crucial energy supplies to Europe this winter.

European Energy Commissioner Guenther Oettinger however said "significant progress" was made after the talks broke up between the Ukrainian and Russian energy ministers, Yuri Prodan and Alexander Novak. "We hope for an agreement next week," he said of the new round of talks scheduled for October 29.

Russia in mid-June cut supplies to Ukraine, demanding the new pro-Western government in Kiev pay sharply higher prices in advance for new deliveries after it ran up what Moscow claims is an unpaid bill of US$5.3 billion (€4.1 billion).

That supply cut heightened concerns that Europe, which gets about a third of its gas from Russia of which about a half transits via Ukraine, could be badly affected by the dispute this winter.

According to Oettinger and Novak, there was agreement on the price of gas, at US$385 per 1,000 cubic metres of gas for deliveries guaranteed through the end of March. But the "major obstacle" to an agreement is that Ukraine has not paid its gas bills for months, Oettinger said.

Hopes for a deal improved after Ukrainian President Petro Poroshenko and Russian counterpart Vladimir Putin reached a preliminary deal at an EU summit last week in Milan. Poroshenko had also cited the new gas price which is 20 per cent lower than the price Moscow charged Ukraine after it cancelled a discount offered to former pro-Russian president Viktor Yanukovych.

According to Novak, Ukraine must pay US$1.450 billion to resume deliveries, and that "it lacked US$1.6 billion" needed to pay in advance for deliveries in November and December. "Over the next week, the European Commission and Ukraine will look into how they can find the cash to honour the bills for November and December," Novak said, adding that so far there are no guarantees from Naftogaz or the European Commission.

The Commission said on Tuesday that Kiev was requesting a further €2.0 billion loan from Brussels. The loan request "will now be evaluated in consultation with the IMF and Ukrainian authorities, and a proposal will be made," Commission spokesman Simon O'Connor said.

In Milan last week, Putin implied an accord was close but urged EU governments to help Ukraine finalise the complex funding it needs to afford the deal.

German Chancellor Angela Merkel, speaking in Bratislava on Monday, said EU member states should do their part. "Everyone must contribute, including Slovakia," Merkel told reporters in the Slovak capital. "We're looking for a solution now. We don't have one yet and winter's already coming," she said.