Commission hopes for new trilateral gas talks on Ukraine

Ambassador Pyatt visits Zakarpattya. Ukraine-Slovakia Border, July 2015.

The US Ambassador visits Zakarpattya. Ukraine-Slovakia Border, July 2015. [US Embassy Ukraine/Flickr]

The European Commission deplored the collapse of the trilateral gas talks today (20 August), in which it was negotiating Ukrainian gas purchases from Russia, and expressed hopes that a new round could take place in September.

On 30 June, Ukraine announced the suspension of all Russian gas purchases after EU-mediated negotiations broke down.

State energy company Naftogaz said it would still continue transporting Russian gas supplies westward to its other European client states.

>>Read: Trilateral talks on Ukraine’s gas supplies fall apart

Moscow dramatically hiked the price it charges Ukraine in the wake of the February 2014 ouster of Kremlin-backed leader Viktor Yanukovych.

The EU – mindful of the price battles, because Russia supplies its member nations with about a third of their natural gas needs – has since been able to broker a series of agreements that need to be renewed every three months.

On his last day in office as Energy Commissioner last November, together with his Russian and Ukrainian counterparts, Günther Oettinger signed a “winter package”, ensuring prepaid gas to Ukraine until 31 March (see background). The present Commission appears determined to repeat the experience.

Asked to comment on the situation, Energy Commissioner Miguel Arias Cañete said today that the Commission wants to facilitate a new protocol for gas deliveries for Ukraine for the next heating session, from October 2015 until the end of March 2016.

“The Commission wants very clearly a second winter package. It’s clear that the last trilateral meeting held in Vienna did not deliver any progress. We went in Vienna with a draft protocol which had largely been agreed at senior official level, with only a few issues in brackets, but at ministerial level position had changed and it became clear that there was no political will to agree a new protocol,” Cañete said.

The Commissioner explained that this was why the EU executive had informed the Normandy Group (France and Germany) about the deadlock of the negotiations and “asked for a strong political steering from the heads of State and government”.

Cañete explained that the EU executive thinks it’s important to come to a successful conclusion of a protocol for three reasons.

The first is to secure the necessary gas supply for Ukraine during next winter, because, although the situation is slightly better compared to last year, thanks to the reverse flows, notably from Slovakia, Ukraine still needed to fill its underground storages to at least 19 billion cubic metres (bcm), to be prepared for a rough winter. The current level is 13.5 bcm, Cañete said.

Second, by securing the supply for Ukraine, the Commission seeks to secure an undisrupted gas supply from Russia to the EU. Cañete said this was also positive for Russia, because this helped them strengthen their reputation as a reliable gas supplier.

Cañete said that the Commission had sent the Ukrainian and Russian ministers a letter summarising the issues to be agreed upon: the nature and duration of the protocol, the price formula with a discount, the minimum purchase volumes, and the financing of the gas purchase.

He added that this paper would be discussed at bilateral meetings. The first will be in August, with Ukrainian Minister of Energy and Coal Industry Volodymyr Demchyshyn, and possibly at the beginning of September, with the Russian energy ministry.

If there is a convergence, there will be probably a trilateral meeting in September, Cañete said.

Ukraine, Russia and the European Union signed a deal on 30 October 2014 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

This avoided a new gas crisis between Ukraine and Russia, which as a rule affect the EU, because in 2009, when Gazprom stopped deliveries to Kyiv, the country used gas destined for Europe for its domestic consumption.

In the summer period, Ukraine's underground gas storage needs to be filled, the replenishment usually taking place until mid-October. The underground gas storage is needed not only for domestic consumption, but for ensuring transit.

Reverse gas flows from Ukraine help fill the underground storage, but last April, a Commission official estimated that a further 4 to 6 billion cubic metres of direct imports from Russia were needed to ensure safety of transit in the winter.

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

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