EU’s Oettinger Sees Ukraine, Russia Resolving Differences Quickly

Guenther Oettenger, the EU’s energy commissioner, says he expects Ukraine and Russia soon can resolve their differences over gas.

Oettinger told reporters on May 27 in the Czech capital of Prague that during talks he attended the previous day in Berlin, the two countries had made additional progress over settling the dispute between Kiev and Russia’s government-controlled gas company, Gazprom.

The EU commissioner also said both sides seemed more accepting of his own proposal that by May 29, Ukraine pay $2 billion of the amount it already owes to Gazprom for gas delivered from November 2013 through March 2014. "I am quite optimistic we can solve all open questions and problems in the next few days," he said.

Oettinger said the progress he’s witnessed also could lead to new talks on the cost of future deliveries of Gazprom gas.

The $2 billion payment of arrears on May 29 would only be “partial payments of the outstanding bills” for Gazprom deliveries from November through March, the EU said in a statement on May 26.

Nevertheless, Oettinger said the payment would be “a clear signal of [Ukraine’s] creditworthiness.” This would lead Russia to attend new talks with Ukraine in Berlin, brokered by the EU, to negotiate the price that Naftogaz must pay Gazprom for deliveries in April, May and in future months.

Next, on June 7, the commissioner said, Naftogaz would pay Gazprom $500 million more, keeping gas flowing into Ukraine – and to the rest of Europe.

Related Article: Ukraine: The Real Energy Crisis Starts in June

Despite Oettinger’s optimism, Ukraine’s energy minister, Yuri Prodan, was more cautious, though he didn’t rule out an eventual agreement. “So far there is not yet a decision taken, and I also assume that from the Russian party no decision has been taken yet,” he said. Prodan described the scenario that Oettinger outlined as merely “a suggestion.”

According to Gazprom, Ukraine owes it $3.5 billion, and the Russian gas company says it will stop deliveries of gas to Ukraine in June unless it pays for it in advance, not in arrears, as has been the practice to date. This could be disastrous for much of the rest of Europe, which gets most of its gas from Russia via Ukraine.

Ukraine says the crisis was engineered by Russia. Gazprom gave Naftogaz a discount on gas while Viktor Yanukovych, who was close to Moscow, was president of Ukraine. Yanukovych fled to Russia in February in the face of street protests opposing his decision against closer ties with the EU and chose to align his government with Russia.

Gazprom promptly raised the price of gas by 80 percent and left Ukraine with crushing gas debt.

By Andy Tully of Oilprice.com