Russia-Ukraine Talks End Without A Deal

Talks between gas supplier Russia and gas consumer Ukraine broke up on June 10 without a resolution, but a spokesman for Russia’s government-owned Gazprom said the westward flow of gas remained uninterrupted.

The talks are being held in Brussels and moderated by EU Energy Commissioner Guenther Oettinger. Also attending are the energy ministers of Russia and Ukraine, and the CEOs of Gazprom and the Ukrainian gas company, Naftogaz.

Oettinger stressed that the talks had not ended, but were only on hiatus. “All points of the deal were negotiated and discussions will resume,” he said.

Russia had threatened to cut off gas supplies to Ukraine by the morning of June 10. The effect on Europe could be dire, as EU nations get one-third of their gas supplies from Russia, and half of that amount flows through Ukraine. The supply of gas to Europe was interrupted twice before, in 2006 and 2009 because of similar disputes.

The current trouble arises from the flight in February of Viktor Yanukovich, who as president of Ukraine faced mounting protests for his insistence on maintaining close ties with Russia and not with the EU. Moscow responded by invading Crimea in March and quickly annexing it.

Russia also increased the price Ukraine must pay for gas by 81 percent, and demanded that Kiev pay $5.17 billion for past gas deliveries and scheduled deliveries through June. Ukraine calls that “economic aggression.”

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Despite any word of progress in the June 10 negotiations, Ukrainian Energy Minister Yuri Prodan said, “The good news is talks are continuing.”

In the meantime, a Gazprom spokesman told Reuters that he knew of no cut in the gas supply to Ukraine.

Before this latest round of negotiations there was broad optimism that an agreement could be reached between the two former Soviet republics. Most observers expected that Russia would settle on a cost of $360 per 1,000 cubic meters of gas – splitting the difference between the price it originally charged Ukraine and the higher price set after Yanukovich’s departure.

Adding to the optimism, one anonymous Ukrainian official told the Agence France-Presse that Naftogaz would offer to pay $1 billion to settle its arrears.

By Andy Tully of Oilprice.com