Russia cuts Ukrainian gas discount amid winter stockpiling
By Bloomberg
Russia offered Ukraine a new deal on gas prices through September, cutting its discount by 60 percent amid efforts by the indebted former Soviet republic to build stockpiles before the cold season.
The government in Moscow agreed to lower the contract rate by about $40 per 1,000 cubic meters during the third quarter, Russian Prime Minister Dmitry Medvedev said in Moscow on Monday. That leaves the price unchanged against the current quarter at about $247, OAO Gazprom Chief Executive Officer Alexey Miller said. The current $100 discount expires Tuesday.
“This is a serious measure supporting Ukraine’s economy,” Medvedev said. A bigger discount would have pushed the final price lower than for neighboring countries after a slump in oil, which is used as a benchmark in Gazprom’s contracts. “I hope it will get adequate support” in Ukraine, he said.
Ukraine plays a key role in the European Union’s energy security as Russia uses its pipelines to supply more than 10 percent of the 28-member bloc’s gas needs.
While Gazprom and its Ukrainian counterpart NAK Naftogaz Ukrainy have entered international arbitration to resolve their dispute over gas prices and debt under the supply contract in place through 2019, the EU has brokered two interim deals between them since October after flows were halted for almost six months last year.
Russian, Ukrainian and EU officials plan to meet in Vienna Tuesday to discuss Gazprom supplies from July 1, after the current accord ends, Russian Energy Minister Alexander Novak said at the meeting with Medvedev.
Naftogaz sought an interim deal until an arbitration ruling, which is expected only in 2017, according to Gazprom. Ukrainian Energy Minister Volodymyr Demchyshyn said earlier this month that the country was expecting to pay a lower price in the third quarter.
Ukraine needs to add about 7 billion cubic meters of gas to its current stockpiles to reach a target of 19 billion cubic meters before the heating season. That’s equal to $1.7 billion using the Russian gas price.
“We should meet our Ukrainian partners halfway within reasonable limits, despite all the difficulties in our current relationship,” Medvedev said. “The country is in a pre-default situation.”