UKRAINE GAS TALKS BREAKS DOWN

Ukraine gets half of the natural gas it uses
from Russia. However, it's not an evenly
distributed half. Ukraine needs far more gas
in winter, and far less in Summer. Ukraine
has enough gas now to last until September.
Politics being politics, resolution of the
dispute could be another two months away
before anyone panics. Thus, it should be no
surprise that Russian Gas Payment Talks Fail .
Ukraine risks the cutoff of natural-gas
supplies from Russia after overnight talks
to resolve a pricing dispute between the
two countries ended without a deal less
than eight hours before a payment
deadline.
Ukraine must pay $1.95 billion to partially
settle its debt to the Russian-owned
natural gas exporter OAO Gazprom for
past deliveries by 10 a.m. Moscow time
today, said Sergei Kupriyanov, a company
spokesman, by phone. He said the
deadline won’t be waived.
“The Russian side has stated that if there
will be no upfront payment, it will start
limiting gas,” said Ukraine Energy
Minister Yuri Prodan.
Russian negotiators rejected a compromise
proposal by the European Union,
according to EU Energy Commissioner
Guenther Oettinger, who has been
involved in the trilateral talks since they
started in May.
The EU, dependent on Russian gas piped
through Ukraine for about 15 percent of its
supplies, is trying to broker a deal to
maintain shipments amid the fuel
payments conflict. In Ukraine, government
forces and rebels claiming allegiance to
Russia continue to clash in the east of the
country.
“For the moment our Russian partners
didn’t accept my proposal,” Oettinger said.
“We have no common understanding.”
Ukraine was ready to accept the EU
proposal of a price range between $300
and $385 per 1,000 cubic meters, still
above the $286.5 that the country paid in
the first quarter, Kobolyev said today.
Gazprom’s final offer was $385, the
company said last week.
Ukraine, which relies on Gazprom (GAZP)
for about half its gas, is able to survive
without Russian fuel until the middle of
September as its current gas consumption
almost matches domestic output due to low
seasonal demand and the stalling of
production at its chemical plants in the
east, according to a Concorde Capital, a
Kiev, Ukraine-based investment company.
The last paragraph above explains all you
need to know. The setup in Ukraine is quite
like debt ceiling negotiations in the US,
typically solved at the last moment with
huffing and puffing and overblown reporting
of consequences if a deal is not reached.
Given that Russia needs the income and
Ukraine and Europe needs the gas, the odds
of a deal "in due time" are at least 95%.