Russia may resume gas supply next week if Ukraine pays $2.2 billion: Gazprom

[October 31, 2014]  By Denis Pinchuk and Olesya Astakhova
 
 MOSCOW (Reuters) - Russia may restart gas supplies to Ukraine as soon as next week if Kiev pays $2.2 billion worth of debts and pre-payments, Alexei Miller, head of state gas monopoly Gazprom, said on Friday.

Moscow, Kiev and the European Union clinched a deal on Thursday that would resume supplies of Russian gas to Ukraine over the winter in return for payments funded in part by the Ukrainian government's Western backers.

Gazprom halted supplies to Ukraine in June amid a bitter dispute over debts and pricing between Moscow and the former Soviet republic that is now seeking to foster closer ties with the West rather than Russia.

Miller said Gazprom would restart supplies to Ukraine within two days after Kiev covers part of its debt for past gas deliveries and provides a pre-payment for supplies that would reach it in November.

"Everything depends on when Ukraine makes this payment. We understand this can happen by the end of next week," Miller told state TV broadcaster Rossiya 24 in an interview when asked about possible timing for resuming supplies.
 

Miller said Ukraine must provide $1.45 billion to cover for part of gas debt and pay $760 million up front for November before supplies resume. By the end of the year, Kiev must pay a total of $3.1 billion in debts for past deliveries, he added.

He said Kiev will need to pay another $760 million in advance to receive gas in December and that maximum daily supplies stood at 114 million cubic meters with a deal between the sides for monthly supplies of 2 billion cubic meters in both November and December.

The deal struck in Brussels on Thursday allows Kiev to use some resources under its existing accords with the EU and the International Monetary Fund to fund the pre-payment. Kiev says it has resources put aside to cover past debts to Gazprom.

Under the agreement, Ukraine would buy gas for the rest of this year at $378 per 1,000 cubic meters and at $365 in the first quarter of next year.

Russia says the price amounts to a $100 discount compared to previous agreements with Ukraine and Miller said on Friday he expected Russia's government to approve it formally on Saturday.

WINTER SUPPLIES

Kiev said on Friday documents signed in Brussels included the EU executive arm's guarantees of financial support to Ukraine should Russia renege on the agreed price, as well as the promise of support from Brussels for further increasing reverse gas flows to Ukraine from EU member states.

The EU depends on Russia for about one third of its gas needs and about half of that flows in transit via Ukraine. Gas spats between Moscow and Kiev in the past have disrupted those supplies and left parts of Europe shivering in winter.

Ties between Kiev and Moscow are now also badly strained over Russia's annexation of Crimea in March and the pro-Russian separatist rebellion that followed and is threatening to split Ukraine's eastern regions.

Kiev and the West blame Moscow for fanning the unrest and providing arms and troops to rebels in fighting that has killed more than 3,700 people since April. Moscow backs the separatists but denies being party to the armed conflict.

On Thursday, European officials assured that gas supplies to Europe would not be in danger this winter. Miller struck a more cautious tone, saying gas transit risks persisted and sought to put the blame on Ukraine for any future disruptions.

Ukraine's Prime Minister Arseny Yatseniuk is expected to speak at the country's gas transport monopoly Ukrtransgas later on Friday.

(Additional reporting by Pavel Polityuk in Kiev, Writing by Gabriela Baczynska, Editing by David Evans)

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