Ukraine cuts Gazprom import volumes

Jan. 13, 2012 at 8:45 AM
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KIEV, Ukraine, Jan. 13 (UPI) -- Ukraine says it will unilaterally cut the volume of gas it imports from Russia's state-owned Gazprom, escalating the long-running Kiev-Moscow gas price feud.

Ukrainian Minister of Energy and Coal Industry Yuriy Boyko declared Wednesday in Kiev his country will only import enough gas to sustain the national economy -- some 27 billion cubic meters in 2012, Ukrainian National Radio reported.

That's only half of the amount Ukraine is contractually stipulated to buy under a long-term contract that runs until 2019, Gazprom Chief Executive Alexei Miller responded in Moscow.

Gazprom pegs its long-term gas export prices to those of oil, and under those terms the Ukrainian utility Naftogaz is currently paying about $400 per 1,000 cubic meters -- almost twice as much as it was at the start of 2011.

Boyko's announcement of unilateral cutback in imports raised fears ongoing negotiations on a new gas deal could be undermined and prompt Kiev to again switch off its transit tap linking Gazprom to its European customers, as it did in 2006.

Kiev contends Naftogaz is sinking in debt in part because of the terms of the 2009 gas deal with Russia and claims it is one of the most expensive in Europe.

Boyko said the negotiations will continue "until an acceptable model for the Ukrainian economy is found," adding he will report to Parliament on the talks' status Jan. 13 as scheduled.

Miller, appearing in Moscow with Russian President Dmitry Medvedev, asserted Ukraine has a "take-or-pay" clause in its contract and claimed imports had already fallen by nearly 67 percent since the New Year, Interfax reported.

"Ukraine made such a statement without having reached agreement with the Russian side, and we have made no such changes in the contract," Miller said.

"So far, our Ukrainian friends are only talking, but no specific proposals have been made," he added. "We can hope that some sort of specific proposals will be made in the near future."

Ukraine last month was importing 100-110 million cubic meters of gas per day, but the daily levels have fallen steadily since then, Interfax said. By Monday they had fallen to 33.3 million cubic meters.

Purchases by Ukrainian chemical manufacturer OstChem had plunged by almost 83 percent from 23 million cubic meters to only 4 million cubic meters per day.

A new round of negotiations over the gas price is set for this month.

Should no agreement be reached and transmission links to Europe be shut off as a result, both Ukraine and Russia could be at a disadvantage toward Europe this time around, The New York Times reported.

That's because European consumers now have more access to natural gas on the spot market as well as to alternative sources of liquefied natural gas, Graham Freedman of energy consultants Wood MacKenzie told the newspaper.

"Russia now faces real competition from LNG and from shale gas, which the Europeans have access to," he said. "It should be worried."

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