Ukraine agrees on Russian gas

Ukraine agrees on Russian gas

Naftogaz Ukraine will return to buying gas from Russia this year, ending a more than two-year hiatus, as a result of a ruling by a Swedish arbitration court on its gas dispute with Moscow, the head of Ukrainian firm Naftogaz Andriy Kobolev said in a briefing.

"From this year we are obliged to take a minimum volume (from Russia’s Gazprom)," Naftogaz chief said. He added that Ukraine would continue buying gas from Europe also.

"Gazprom must sell us gas at a price lower than the European one and we see that as positive," Reuters cited Kobolev as saying.

Kobolev did not say when Naftogaz would start buying supplies from Russia or what the exact volumes would be.

In June 2014, Gazprom and Naftogaz lodged multi-billion-dollar claims against each other with a Stockholm arbitration court, which resolves commercial disputes. In December, the Stockholm court had ordered Naftogaz to pay more than $2 billion to Gazprom for gas supply arrears and that it had also ordered Naftogaz to buy 5 bcm of gas from Gazprom annually from 2018. Ukraine also has to pay for at least 80% of that, according to the court.

A leading analyst of the National Energy Security Fund, a lecturer at the Financial University under the Government of the Russian Federation, Igor Yushkov, speaking to Vestnik Kavkaza, noted that it will improve Russia-Ukraine trade turnover statistics, but not their economic relations.

For Ukraine, these mandatory 5 billion cubic meters of Russian gas per year will be economically viable. "I think they will be cheaper than the reverse gas that Kiev buys, because the reverse gas is bought from Russia by Europeans and resold to Ukraine with a surcharge of $20-40 per 1000 cubic meters. For Naftogaz, a return to direct purchases from Gazprom is very beneficial, but it is not beneficial for the Ukrainian leadership: Ukraine buys gas from European traders in Europe, whose owners are affiliated with Ukrainian politicians and businessmen, who take Ukrainian state money and transfer it into their pocket. Now their income will decrease, although I think they will continue to buy gas from European traders, but under the guise of a diversified basket of purchases, that is, the scheme for money laundering will be kept," Igor Yushkov predicts.

"If arbitration satisfied all the requirements of Gazprom, the whole Ukraine would have to become bankrupt - the demands of the Russian company exceeded $ 50 billion. If all $ 50 billion is awarded to Gazprom in Moscow, de facto they will have to be given to Europeans, not to Kiev," the leading analyst of the National Energy Security Fund concluded.

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