GAZPROM DISMISSES UKRAINE
Russia's Gazprom has shrugged off a Ukrainian proposal to bring in Western companies to invest in the natural gas pipeline which crosses the country, saying other transit routes bypassing Ukraine still promised to make the pipeline redundant.
Gazprom's comments come as Ukraine and Russia remain locked in a multi-billion dollar dispute over unpaid gas bills. The two countries are also at odds after Russia annexed Ukraine's Crimea region in March.
The Ukraine idea on pipeline investment is part of a response to Moscow's decision to cut off gas supplies on June 16, following Kiev's failure to pay some of its gas debts to Moscow.
Ukraine wants to share necessary investment in the ageing pipeline as it needs the transit fees it generates for its strained budget. But Gazprom says it has other transit options that mean it won't be dependent on the Ukraine link after any new infrastructure is build.
"It won't anyhow affect us. But let's not forget that its (Ukraine pipeline's system) age is over 35 years with no needed investments done," Deputy Chairman Alexander Medvedev told reporters on Friday.
Russia, Ukraine and the European Commission had held several rounds of fruitless talks, after which Gazprom cut gas supplies to Ukraine.
Russia has said it will not agree to revise the price until Kiev pays $1.95 billion to cover part of the debt, raising the possibility of gas flows cuts to Europe.
Gazprom said its gas flows to Europe via Ukraine increased on Friday despite the standoff.
Russia used to ship around three-quarters of its gas exports to Europe via Ukraine. But the share has declined after it launched the Nord Stream pipeline with an annual capacity of 55 billion cubic metres (bcm) via the Baltic Sea directly to Germany in 2011.
Gazprom plans a further pipeline, South Stream, to ship gas to Europe across the Black Sea in 2015, with a view to increasing its annual capacity to 63 bcm by 2018-2019, despite opposition from the EU, which is unhappy that the project would not be open to other suppliers.
"After we build South Stream, taking into account Nord Stream and other routes, there will be almost no need left to use Ukraine's gas pipeline system," Medvedev said.
TIME FOR TALKS
Unlike in previous gas pricing disputes, which led to cuts in Russian gas supplies to Europe in the winters of 2006 and 2009, the latest row has flared up in summer, when gas demand is at a seasonal low. Analysts say the talks may continue for a few months before seasonal demand rises.
"Gazprom will stick to its position that Ukraine has to pay the debt first. This is non-negotiable for the Russian company," Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies, said.
According to Ukrainian state energy firm Naftogaz, Ukraine has stored 14 billion cubic metres (bcm) of natural gas underground. It says its consumption is less at the moment than it produces and receives from Europe.
This year, Ukraine expects to get between 5 and 6 bcm from Europe in so-called reverse flows. Both Gazprom and Naftogaz have appealed to an international arbitration court to settle their dispute.
Ukraine wants to return to a discount price of $268.5 per 1,000 cubic metres, almost doubled by Moscow when pro-Russian Ukrainian President Viktor Yanukovich fled after fatal street clashes.
Moscow is ready to offer a discount to $385 per 1,000 cubic metres by scrapping export duty compared with the $387 Gazprom charged its European clients on average last year.
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