Energy Minister Yuriy Prodan declared on March 25 that the Ukrainian government will only pay Russia’s Gazprom "old-new" price of $387 per 1,000 cubic meters of natural gas in the second quarter of this year.
Prodan believes that the agreement signed between Ukraine and Russia on Dec. 17, implying price of $268.5 per 1,000 cubic meters of Russian gas, is null
and void. However, Ukraine will not pay close to $500, which Prime
Minister Arseniy Yatsenyuk said the Russian government wants to start charing Ukraine on April 1.
As far as the Ukrainian government is concerned, the $100 gas price
discount to which Ukraine is entitled by the Kharkiv Accords of 2010 is still in
effect, and Gazprom can sue them if it thinks otherwise, said Prodan.
According to the minister, no formal steps have been taken to renounce the
Kharkiv Accords that involve providing a gas price discount for extending the
Russian Black Sea Fleet’s right to base in Crimea until 2042, with an additional five-year
renewal option. The deal was signed by Ukrainian President Viktor Yanukovych and Russian President Dmitry Medvedev in Kharkiv in April 2010.
The reality of the always contentious Russian-Ukraine natural gas
relations, however, will only be revealed on April 1. Ukraine consumes up to 30
billion cubic meters of gas from Russia per year.
The old price for the transportation of Russian gas should still be in
effect with Gazprom. “If we find grounds to change the pricing, we will bring
up the question, but the issue should be resolved with two signatures,” said
Prodan.
Diversification of gas suppliers
Attempts to diversify gas supplies from Central Europe are off to a rough
start. Prodan reported that Slovakia has not offered Ukraine to sign a proper
gas sale agreement, as requested.
“There is a possibility to transfer from Slovakia to 12 billion cubic
meters of gas annually,” said the minister. “However, Slovakia wants to sign a
memorandum instead of a contract, which anticipates building something. We are not
interested in this memorandum.”
Earlier, European Commissioner for Energy Gunther Oettinger on March 19
said that Slovakia is ready to start reverse flow of gas to Ukraine by the end
of 2014. Two weeks before that, Slovak Prime Minister Robert Fico said that the
decision of the technical issue of reverse gas to Ukraine would take at least
nine months.
Prodan also said that Ukraine may receive 4.4 million cubic meters of gas
per day from Poland and 15 million from Hungary.
Crimean electricity system
Meanwhile, Crimea is in for a rude awakening regarding energy costs, as
Prodan threatens vastly higher tariffs for all sorts of electricity on the peninsula.
“If the debt [to the local power companies] continues to grow, the energy
system of the Crimea will have the full right to disconnect these companies
from the grid, while electricity supplies will carry those rates that operate
on the wholesale market for all Ukrainian enterprises,” the minister said.
Prodan does not exclude that after the adoption of the law “On Occupied
Territories” that electricity tariffs for Crimea will be significantly
increased.
According to Batkivshchyna Party faction chair Sergiy Sobolev, electricity
tariffs in Crimea are understated by four times.
Rolling blackouts were reported in several regions of Crimea this week.
Prodan added that under the current situation, Ukraine will not subsidize
the huge tariffs for solar energy investment programs in Crimea. “Therefore, we
have suspended the respective financing of the generation of solar energy on
the territory of the Autonomous Republic of Crimea.”
Once parliament passes the law “On Occupied Territories”, the mode of
operation of business entities will be determined by the Cabinet of Ministers.
“Of course, then the price of electricity will be significantly increased,” Prodan
said.
On March 20 parliament approved in the first reading a bill that recognizes
Crimea and Sevastopol as temporarily occupied territories, and states that this
territory is an integral part of Ukraine and is subject to Ukrainian
legislation, while the responsibility for any violation of human rights belongs
to the Russian Federation.
Kyiv Post business journalist Evan Ostryzniuk can be reached at [email protected].
