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Russia to switch Kiev to gas prepayment from June

Friday, 9 May 2014 - 12:06pm IST | Agency: Reuters

Russia will require Ukraine to pay in advance for gas starting from June, Energy Minister Alexander Novak said late on Thursday, after Kiev failed to pay for gas deliveries.

Gazprom said on Wednesday that Ukraine's payments for gas supply in April had fallen due and that nothing had been paid, raising Kiev's total debt for Russian gas to $3.51 billion.

"According to contract... failure of obligations automatically leads to a switch to prepayment for gas deliveries for Ukraine starting from June 1," Novak said in a statement late on Thursday.

Russia had threatened to cut gas supplies to Ukraine in June if it receives no prepayment by the end of May. Gazprom supplies about 30 percent of the gas consumed in Europe, shipping about half of that via Ukraine.

Russia's Energy Ministry added that Gazprom would send a preliminary bill for June before May 16 and will ship gas in volumes reflecting payments received before May 31.

The Kremlin has often used its energy dominance as a tool of foreign policy, cutting off supplies to Ukraine and Europe in 2005 and 2009 after price disputes with an earlier pro-Western government in what became known as the "gas wars".

Ukraine desperately wants to change the conditions of a 2009 contract, negotiated by an earlier pro-Western government, which locked Kiev into buying a set volume whether it needed it or not at $485 per 1,000 cubic metres - the highest price in Europe.

Moscow dropped the price to $268.5 when ousted President Viktor Yanukovich turned his back on a trade and association agreement with the European Union but re-instated the original price after the uprising in Ukraine.

"Russia can't and should no long carry the burden of support of Ukraine's economy alone, giving it discounts on the gas price and forgiving debts, in fact covering the deficit in Ukraine's trade," Novak said in a statement.

This week, Ukraine received a first tranche worth about $3.2 billion from a $17 billion two-year aid programme from the International Monetary Fund, which Moscow hopes Kiev will use to cover gas debt.

(Reporting by Katya Golubkova, editing by Nigel Stephenson)




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