RUSSIA: UPS STAKES
Gazprom will only supply Ukraine with gas that has been paid for in advance from the start of June, Moscow said on Thursday, after Kiev missed another deadline to pay its mounting energy debt to the Russian company.
Alexander Novak, Russia's energy minister, said the state-controlled enterprise would move to a system of pre-payment for supplies to Ukraine from next month, bringing the simmering gas dispute between the countries a step closer to crisis.
The move to pre-payment raises the prospect of a disruption in gas supplies through Ukraine – a key transit point for about 15 per cent of European gas supplies.
Cash-strapped Ukraine, which this week received the first $3.2bn tranche from a $17bn International Monetary Fund bailout, has refused to accept Gazprom's move in April to increase gas prices from a first quarter rate of $268.50 per thousand cubic metres to $485.50.
Oleksandr Todiichuk, deputy chairman of Ukraine's state gas company Naftogaz, told the Financial Times on Thursday that the risk of the dispute leading to gas disruptions that could affect EU markets was "pretty high".
Mr Todiichuk said the potential for a new "gas war" was pushing Ukraine – along with countries in the EU – to step up discussions on measures to diversify away from Russian gas.
The possibility of a shift to pre-payment was raised earlier in a letter from President Vladimir Putin to European leaders, in which he gave warning that gas supplies to the continent could be disrupted if the dispute between Gazprom and Ukraine was not resolved.
In a statement, Mr Novak said Ukraine now had $3.5bn in overdue gas debts to Gazprom after the most recent payment deadline passed on Wednesday – meaning that it was within its contractual rights to demand pre-payment.
The company would present Kiev with a preliminary bill for June gas supply by May 16, he said, and would only supply in June the quantity of gas that had been paid for by the end of May.
"Russia cannot and should not any longer bear the burden of supporting the Ukrainian economy alone – providing it with discounts on gas and forgiving debts," said Mr Novak.
Russia, Ukraine and the EU are holding a series of talks this month in an attempt to resolve the dispute over payment. Gazprom insists that Ukraine must start to pay its debts, while Kiev argues that the new price is unfair and unsustainable.
Refusing to pay the higher rate for April supplies, Naftogaz has initiated arbitration.
"We cannot cover pre-payment at the price rate of about $480 for 1,000 cubic metres . . . so we are back at the issue of the arbitration process," Yuriy Prodan, Kiev's energy minister, told journalists on Thursday.
On Wednesday night, Arseniy Yatseniuk, Ukraine's interim prime minister, said his country was ready to pay its gas bills "within 10 days" if Gazprom were to agree to a fair price.
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