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25/09/2016

Ukraine plans to stop buying Russian gas

Europe's East

Ukraine plans to stop buying Russian gas

Volodymyr Demchyshyn

[STRC/Wikimedia]

Ukraine plans to stop buying Russian gas from 1 April, Ukrainian Energy Minister Volodymyr Demchyshyn said in a briefing today (23 March). The European Commission, which was mediating to ensure gas supplies to Ukraine over the summer, said it was “taking note” of the announcement.

“At the moment we don’t need to buy Russian gas. We will simply stop buying it,” Demchyshyn said, according to Reuters.

On Saturday, the minister stated that Ukraine was confident Russia would have to lower the price it charges Kiev for gas, as increased imports from the European Union have greatly reduced Ukraine’s reliance on supplies from Gazprom.

Russia and Ukraine met on Friday in Brussels to discussing a new pricing arrangement once the current package expires at the end of March. 

The talks, chaired by Vice-President for Energy Union Maroš Šef?ovi? who acts as a mediator between Moscow and Kyiv, were reportedly “constructive”. A Commission press release expressed the hope that the transit gas flows to the EU would remain unaffected.

A Commission official has explained last week that without Russian supplies the necessary 18-19 billion cubic meters (bcm) of gas in the Ukraine underground storage facility of Ukraine could not be ensured.

The current level is 7.4 billion, of which 5 billion was technical gas, which is very low, and this level is still going down. At the end of this month, the figure could be of 6.5 bcm, the official said.

He recognized that the situation this year was better than the previous year, because there were regular reverse gas flows, especially from Slovakia to Ukraine. The other reverse flows are from Poland and Hungary, but the official called the flows from Hungary “ridiculously low”, and said that those from Poland were not used.

>> Read: Commission sheds light on trilateral gas talks with Ukraine, Russia

Commission Spokesperson for Climate Action and Energy Anna-Kaisa Itkonen said that the decision announced today “is the right of Ukraine”.

According to Itkonen, as we the winter is over, Ukraine should be well equipped to make do with its current gas storage (she mentioned the figure of around 7.8bcm), combined with domestic production and reverse flows from Slovakia, Hungary and Poland.

Background

Ukraine, Russia and the European Union signed a deal on 30 October that allowed Moscow resume vital supplies of gas to its ex-Soviet neighbour over the winter, in return for payments funded in part by Kyiv's Western creditors.

>> Read: EU unblocks ‘unprecedented levels’ of cash to secure gas for Ukraine

Worth $4.6 billion in total, the package calls for Ukraine to pay $3.1 billion (€2.46 billion) in two tranches by the end of the year to cover debts for previous supplies from Russia's Gazprom. Kyiv will have $1.5 billion (€1.19 billion), some from existing accords with the EU and IMF, to pay for about 4 billion cubic metres of new gas until March, for which Russia is insisting on cash up front.

Commission: Inaugural trilateral EU-Russia-Ukraine meeting on gas