Putin Says Ukraine Will Pay More for Gas To Cover Past Losses

In an interview on the sidelines of the G8 summit, Russian President Vladimir Putin said Ukraine will face an extra markup for Russian gas of around 12-17%. He said for the last 15 years Russia had been subsidizing Ukraine with low gas prices and that the extra increase in prices will allow it to compensate Russia for past losses. Vladimir Nesterenko: Putin’s statement looks much more threatening at first glance than it really is. Currently Ukraine’s gas supplies are sourced solely from Central Asia (mainly from Turkmenistan), the annual volumes were contracted and are to be delivered by RosUkrEnergo. Ukraine is only likely to buy more expensive Russian gas during temporary shortages from unexpected consumption peaks (e.g. during cold winters). We do not think the higher price for these residual volumes can materially affect Ukraine’s yearly average gas prices. However, over the next 2-3 years, we expect gas prices for Ukraine to reach USD 180-200/tcm.