Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Russia's Gazprom has given Ukraine an extra week to resolve a gas price dispute at the heart of the two countries' confrontation. As Sonia Legg reports the delay will take the pressure off President Putin as he prepares to attend D-Day events with other world leaders later this week. (Reuters)
Russia's Gazprom has given Ukraine an extra week to resolve a gas price dispute at the heart of the two countries' confrontation. As Sonia Legg reports the delay will take the pressure off President Putin as he prepares to attend D-Day events with other world leaders later this week. (Reuters)

Gas-price talks stall as Putin says Ukraine is pursuing a 'dead end' Add to ...

Russian President Vladimir Putin accused Ukraine on Wednesday of forcing gas talks into a “dead end” by rejecting a price cut offer made amid a row threatening supplies to the rest of Europe.

As Kiev demanded contract changes to lower the highest prices in Europe for Russian gas supplies, Moscow also dug in its heels, suggesting its proposed price cut of about one-fifth to around $385 per 1,000 cubic metres was its final offer.

More Related to this Story

The dispute is part of a broader standoff between Ukraine and its former Soviet master, as Kiev’s new West-leaning leadership struggles to contain a pro-Russian separatist rebellion in its eastern provinces.

Arguments over what Russia charges for its gas have rumbled on for years and led to supply cutoffs in 2006 and 2009.

Putin, meeting his government outside Moscow, said Russia had offered a discount of $100 per 1,000 cubic metres by removing an export duty. That would roughly bring it in line with the price paid by other European consumers.

“The reduction is too little for our Ukrainian partners, they want more, although it’s not clear on what basis,” he said. “If this is the case, then it seems that the issue is being driven into a dead end.”

The latest crisis flared with the overthrow of Ukraine’s Moscow-leaning president Viktor Yanukovych in February, after which Moscow annexed its neighbor’s Crimea region and nearly doubled the price Kiev has to pay for gas.

Russian gas exporter Gazprom had been charging a preferential rate as part of Moscow’s effort to keep Ukraine from drifting into the orbit of the European Union.

Earlier on Wednesday, Ukrainian Prime Minister Arseniy Yatsenyuk made clear at a cabinet meeting that Kiev rejected Russia’s offer to lower gas prices by removing the export duty, a measure that would not be written into the contract and was therefore at the whim of Moscow.

“I want to say that we know these Russian traps. The discount is set by the Russian government and canceled by the Russian government,” he said.

Ukraine instead wants to change a 2009 contract that locked it into buying a set volume of gas, whether it needs it or not, at $485 per 1,000 cubic meters. The average gas price for Europe was about $387 per 1,000 cubic meters last year but Gazprom has given no current figure.

The European Commission, the EU executive, has taken on the role of brokering trilateral price talks, but five rounds have failed to secure a deal.

Arriving for Wednesday’s talks at the European Commission in Brussels, EU Russian envoy Vladimir Chizhov hinted that Ukraine was the obstacle.

“These negotiations stand a good chance of success, but this particular tango takes three,” he said. Asked who was out of step, he said: “No prizes for guessing.”

Negotiators hope Wednesday’s talks between the countries’ two energy ministers, the Commission and the CEOs of Gazprom and Ukraine’s Naftogaz will build on progress made in talks that broke up in the early hours of Tuesday in Brussels.

Gazprom extended until Monday a deadline for Kiev to switch to prepayment or face a supply cut-off, but it was not clear if the longer negotiation time improved prospects for a deal.

If supplies are cut to Kiev, there could be knock-on disruptions to the European Union as roughly half of the gas it receives from Russia – about 30 per cent of its gas demand – is shipped via Ukraine.

The talks between Russia, Ukraine and the European Commission have been going on while Kiev, Moscow and the Organization for Security and Co-operation in Europe discuss peace proposals put forward by Ukraine’s new president, Petro Poroshenko, to settle the armed stand-off in the east.

Those talks have produced what Kiev says is a mutual understanding on key aspects of the peace plan, intended to end the insurgency by rebels who want parts of Russian-speaking eastern Ukraine to join Russia.

Analysts say resolving the gas row would go some way to taking the heat out of the wider conflict.

Moscow dropped Ukraine’s gas price from $485 per 1,000 cubic metres to $268.50 after Yanukovych turned his back on a trade and association agreement with the EU last year, but reinstated the original price after he was ousted.

Moscow says Ukraine has stacked up more than $4-billion in debts to Gazprom and must pay off some of that before a new price deal can be reached.

Kiev paid off $786-million at the start of last week but has since said it will pay more only when an overall deal is struck.

Follow us on Twitter: @globeandmail

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories