Ukraine, Russia agree that Ukraine won’t prepay for gas supplied to eastern Donbas

The energy ministers of Ukraine, Russia and the EU met in Brussels on March 2 to discuss the fulfillment of the interim winter natural gas contract signed for November 2014 – March 2015, Ukrainian state monopoly Naftogaz reported on its website. Naftogaz said it presented evidence of Russia’s breach of the interim gas deal (earlier, Naftogaz complained Gazprom is not fully executing its gas supply orders).

The core issue discussed at the meeting was Gazprom’s unilateral decision to supply gas to the occupied territories of the Donbas region, without Ukraine’s request. Recall, Russia started supplying gas to the occupied territories of Donestk and Luhansk regions in eastern Ukraine (collectively known as “Donbas”) in mid-February, and Russian PM Medvedev called it “humanitarian gas” that, he believes, should be paid by Ukraine.  

According to Naftogaz, the sides agreed in Brussels that only those amounts of gas that are supplied through mutually agreed collection points will be accounted for in settlements under the interim winter contract. However, this does not mean that Russia will stop supplying gas to the separatists directly, nor does it mean that Russia won’t demand Ukraine to pay for that gas. Russian Energy Minister Alexander Novak confirmed that gas for the separatists will not be calculated in the interim winter contract. At the same time, he clarified that payments for the supply of such gas will be discussed later with the Ukrainian side. “This will be the subject of separate volume verification and separate negotiations,” Novak stated, as reported by the Interfax news agency on March 3. He further clarified that Russia won’t demand prepayment for gas supplied to the separatists, but that gas will still be accounted for by Russia “within the framework of the contract between Naftogaz and Gazprom,” as reported by Interfax.

Alexander Paraschiy: The good news for the Ukrainian side is that Russia decided to fulfill its obligations under the interim winter contract, without any complications. The worrying sign is that Russia is still insisting that Naftogaz should eventually pay for gas that Gazprom supplies directly to the occupied territories. Most likely, settlements for “humanitarian gas” will be declared by Russia as a precondition for signing a new interim contract for gas supply to Ukraine after the current contract expires. Clearly, such a development won’t be acceptable for the Ukrainian government. That means Ukraine and Russia are unlikely to reach any new gas deal in the near future.

Under such developments, Ukraine has to import as much gas as possible from Russia until end-March (when the current contract expires), ideally to sustain itself without a new gas deal with Russia for at least one year. In this game, Russia’s task is to prevent large supplies of gas to Ukraine in March, and it’s efficiently fulfilling this task, as can be seen from Naftogaz complaints.