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Russia claims to offer concession to resume gas supplies

Russia claims to offer concession to resume gas supplies

14 October 2014

The Russian government is willing to reduce its demand for Ukraine’s debt repayment to USD 1.45 bln from USD 2.0 bln in order to restart natural gas supplies, Energy Minister Alexander Novak told journalists on Oct. 13. He said the repayment is for gas that the Ukrainian government imported in 4Q13. The offer was sent to Ukraine and the EU Commission on Oct. 3, though no response was received from the Ukrainian side, according to Novak, as cited by the Interfax news agency. Earlier, Russia insisted that Ukraine pay by the end of October USD 2.0 bln, a portion of Ukraine’s indisputable debt for gas that was imported until June 16, 2014. Novak said the entire debt should be repaid by the end of 2014.

 

The Ukrainian side will consider all of Russia’s offers, Vice Prime Minister Volodymyr Groysman replied the same day, according to the Interfax-Ukrayina news agency. Ukraine and Russia agreed to schedule a new round of trilateral talks on the gas issue, with EU intermediation, on October 21.

 

Alexander Paraschiy: Russia’s alleged “concession” is a simple trap that would allow it to demand an additional USD 0.5 bln as repayment by end-2014 for earlier imported gas. Recall, Ukraine recognizes its total debt to Russia for the earlier imported gas at USD 3.1 bln (as confirmed by Novak on Sept. 30) and earlier Russia demanded that the total recognized debt should be repaid by the end of 2014 (including USD 2.0 by end-October and USD 1.1 bln by end-December, as was offered by Novak earlier).

 

This total debt was calculated by the Ukrainian side, based on the USD 269/tcm price for the entire volume gas which it did not pay for. If Ukraine agrees to pay USD 1.45 bln for gas imported in 3Q14, it will automatically accept that this gas should be priced higher than USD 269/tcm, namely USD 394/tcm.

 

Accepting this, Ukraine will automatically accept that its total debt for earlier imported gas is USD 3.6 bln (including USD 1.45 bln (imported in 4Q13) repayable by end-October and USD 2.1 bln (imported in 2Q14) repayable by the end of December).

 

As a renewed offer from the Russian side does not look “constructive”, it lowers the probability of compromise, which we saw as being not very high to begin with.

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