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May 12, 2014

Dmitry Medvedev tasks Gazprom to switch Ukraine to gas prepayment

A working meeting took place today among Dmitry Medvedev, Russian Prime Minister, Alexander Novak, Russian Energy Minister and Alexey Miller, Chairman of the Gazprom Management Committee.

Alexey Miller informed Dmitry Medvedev that Ukraine’s total debt for Russian gas, including for the past year, totaled USD 3.508 billion. It was pointed out that Ukraine had made small payments at the beginning of the year, but March and April deliveries hadn’t been paid off.

Dmitry Medvedev tasked Gazprom to switch Ukraine to prepayment for gas supplies in line with the existing contract.

Gazprom website Editorial Board

Verbatim transcript of meeting

Dmitry Medvedev:Well, I’d like to talk about something more enjoyable. We’ve just discussed the prospects for cooperation with China; however, the topic of today’s talks and certain decisions that probably need to be made now is interaction with Ukraine regarding natural gas deliveries. Mr. Miller, what is the current state of things and has anything changed on the part of Ukrainian consumers? And what are the proposals?

Alexey Miller:Mr. Medvedev, May 7 was the deadline for April gas payments. Ukraine hasn’t paid a dollar for April deliveries, and so far the total debt for Gazprom’s gas supplies to Ukraine amounted to USD 3 billion 508 million. In this context, in physical values, including last year’s debt, Ukraine hasn’t paid for 9 billion 420 million cubic meters of gas, and frankly speaking, this is a very, very large amount.

Dmitry Medvedev: So, it can be compared with what?

Alexey Miller: This can be compared with Gazprom’s gas supplies to Poland during 12 months. In fact, Ukraine’s non-payment for gas is commensurate with our gas supplies to Poland, for the whole year and free of charge. In line with the existing contract, Gazprom may switch to advance payments, and till May 16 inclusive Gazprom can issue an advance invoice for Ukraine to pay for June’s supplies in full. If, for instance, not 100 per cent, but 50 per cent of gas deliveries are paid off, then over the first fortnight we’ll be supplying gas in the volumes already paid for, and, subsequently, gas supplies to Ukraine will be halted for the second fortnight. However, ‘halted’ is an absolutely unsuitable word, because here we are talking about gas being supplied to Ukraine in strict compliance with the volumes paid for, following the advance invoice. This means that in June, if the decision on switching Ukraine over to prepayments is made, Ukraine will be supplied with as much gas as it would purchase for June.

Gazprom has such a right. The total debt amounts to USD 3 billion 508 million. At the beginning of the year Ukraine paid for gas supplies, though the sums were small, but there are no payments at all, both for March and April deliveries.

Dmitry Medvedev:Irrespective of the price?

Alexey Miller:Yes, irrespective of the price. And the main thing is that the bulk of this debt, a total of some USD 2.5 billion, is owed for gas supplied at the preferential price of USD 268.5. These are gas supplies at a discount price, but Ukraine doesn’t pay a dollar even at this rate.

Dmitry Medvedev: I see. And Gazprom has the right to put into effect that what has been discussed not once, I mean, switch Ukrainian consumers to prepayments. Here’s what I think: enough coddling. Please notify the Ukrainian party and switch to prepayments starting from tomorrow. I think that Gazprom has tried out everything to settle the situation some other way. We have appealed to them, consulted with them several times; you have reported both to me and the President, but it looks like they do not hear us. So, if such is the case, we need to start acting, because it’s impossible to stand this anymore.

What’s going to happen next? I expect you to tell both the media representatives and all the consumers dependent on this supply that… I mean, after switching to prepayments… As you have already said, Mr. Miller, it will mean only one thing, and this is not about halting gas deliveries. We will supply as much gas as they pay for – if they pay 1 euro, we’ll supply gas volumes worth 1 euro; if they pay 1 billion – we’ll supply gas worth 1 billion. We’ll see how this will work.

Alexey Miller: Tomorrow Gazprom will issue, in line with our contract, an advance invoice for gas to be delivered in June and will also forward a letter of notification to Naftogaz of Ukraine on issuing the advance invoice. The Ukrainian party is obliged to pay for June supplies before June 2, due to June 1 being Sunday. In case if Ukraine fails to pay for June deliveries, then Gazprom – before 10 a.m. on June 3 – will report to the Ukrainian party on the gas volumes to be supplied to Ukraine according to the prepayment. If the prepayment is not made, then zero cubic meters of gas will be supplied to Ukraine in June. Once again, of course, one should be aware that this is not about halting the supplies, it is about supplying Ukraine with gas in strict compliance with the prepayments, i.e. how much gas Ukraine will buy for June.

Dmitry Medvedev: I see. Still, they have an opportunity to settle their debts before the end of May, and pay the required amount of money or at least a part of it and start negotiating this matter with Gazprom, that is, express their wish to pay off their debts. Today, we do not see this willingness on the part of Ukrainians, which is certainly very sad.




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