You're reading: Ukraine stakes out aggressive stance with Russia’s Gazprom

Ukraine is going to pay for Russian natural gas only when it comes to an agreement on price with the Kremlin-controlled Gazprom.

“We have not settled the March payments yet as we have addressed our constructive suggestions on the gas pricing and consumption to Gazprom,” Ukrainian Energy Minister Yuriy Prodan said on April 9. “In fact, we suggest to go back to the agreements that we had in 2013.”

Prodan has said that Ukraine will not pay Gazprom more than $387 per 1,000 cubic meters in the second quarter of 2014. “Let them go to court,” he said then as Gazprom then raised the price to $485.

In addition, Ukraine has stopped storing Russian gas while the disagreement lingers.

Ukraine’s state-run energy monopoly Naftogaz lately has been paying $268.5 per 1,000 cubic meters of gas, according to the December agreements between overthrown Ukrainian President Viktor Yanukovych and Russian President Vladimir Putin. The previous price of $400 was set by Yulia Tymoshenko, then prime minister of Ukraine, and Putin in 2009.

Volodymyr Omelchenko, leading energy analyst for Razumkov Center, said that Ukraine stands a good chance of winning if it challenges the Russian gas price in Stockholm Arbitration Court. “However, people in Gazprom think that Ukrainian authorities are not able to protect the country’s interests,” he added.

The gas price discount of $100 per 1,000 cubic meters is in dispute between the two sides.

The so-called 2010 Kharkiv Accords introduced a discount in exchange for an extention of the Russian Black Sea Fleet in Crimea until 2042. But now that Russia has seized Crimea by military force and annexed the territory — nearly 5 percent of Ukraine’s land mass and population — Kremlin leaders have decided to cancel the discount.

Ukraine already owes Gazprom $2.2 billion, according to the Russian gas giant’s press service. Russian authorities say Ukraine owes the state and private entities in Russia nearly $17 billion. Besides, Putin demands prepayments for the gas. If Ukraine continues not to pay its bills – and without outside help, it cannot – Gazprom can cut off supplies.

However, if Gazprom cuts the flow of gas, Kyiv might be able to skim off some of the gas destined for the European Union. In 2013, Russia covered 30 percent of EU’s gas needs, while half of it – 80 billion cubic meters – passed through Ukraine.