Gazprom Deputy Chairman Alexander Medvedev briefed the media in Prague today on the latest developments on the gas dispute:

• Negotiations over the gas contract are unable to resume because there has been no relevant response from the Ukrainian side.  Gazprom is ready to fulfil its commitments to the EU and will use all measures to make Ukraine comply with its obligations as a transit country. 

• Ukraine has been siphoning off natural gas from some of Russia's shipments to other countries and also from underground storage, leading to supply reductions in several European countries including Romania, Hungary and Poland.

• Gazprom is using alternative routes, including Belarus, but does not have enough capacity there to bring supplies to normal levels.

Listen to Kurpriyanov's interview with Ekho Moskvy (in Russian)

Sergei Kupriyanov made the following remarks during an interview today with Ekho Moskvy: 

• In regards to claims that there is no merit to penalties and fines for late payment, the 2008 gas delivery contract contained a clause stating that there would be a 3% penalty for each day payment was delivered late.
• To ensure that European customers are not disrupted, and that there is no illegal siphoning of gas, Gazprom has independent observers monitoring pipeline exit and entrance points. Ukraine is physically refusing to let the observers in and perform their assigned function within Ukraine. 
• In response to remarks from an aide to Ukrainian Prime Minister Tymoshenko that Ukraine hopes to have a signed contract by January 7, Kuprianov said that Gazprom is here at the negotiating table as soon as Naftogaz Ukrainy is ready.
• Kupriyanov also made the following remarks at a separate briefing on Thursday:
• In regards to an impasse with the Naftogaz delegation, Kupriyanov stated: "The main problem was not that we disagreed on the price of gas but that the Naftogaz delegation did not have a mandate to sign a new contract.”
• Gazprom continues to call for a resumption of negotiations. 
• To ensure an adequate supply of gas for the European market, Kupriyanov stated “Deliveries for export have been increased to 326 million cubic metres per day."

Gazprom Confirms No New Contract with Ukraine After Talks Fail

After weeks of negotiations OAO Gazprom and NAK Naftogaz Ukrainy have reached a critical impasse in efforts to finalize a new contract for gas deliveries to Ukraine in 2009. Gazprom has been doing everything in its power to make a success of the negotiations, but as there is no contractual basis for further gas supplies to Ukraine, Gazprom has no option but to reduce supplies to Ukraine by the amount committed to Naftogaz Ukrainy – without in any way reducing the quantities contractually committed to our onward customers in Europe – from 10:00 am Moscow time on Thursday, 1 January 2009.  The previous contract expired on Wednesday, 31 December 2008.   

At issue are the following: the status of the repayment of $2 billion in debt owed to Gazprom for gas deliveries to Ukraine in November and December 2008, as well as fines and penalties; attempts by Naftogaz Ukrainy to amend a separate and pre-existing gas transit contract that is valid through 2010; and Ukraine’s apparent unwillingness to move towards fair market prices for gas supplies, despite signed agreements to do so.

On the issue of debt repayment, RosUkrEnergo has received a payment from Naftogaz Ukrainy in the amount of $1.5billion out of a total due of $2 billion. Naftogaz Ukrainy has recognized the $2 billion debt it owes Gazprom and had the money to pay that debt. 

Naftogaz Ukrainy has also taken the radical step of tying the fate of the new gas delivery contract to changes to a pre-existing and wholly separate gas transit contract. The existing transit contract, valid through 2010, obliges Ukraine to transit at least 110 bcm of gas per year to Europe. Gazprom currently pays Ukraine a fee of $1.60 per 100 km, which is comparable to transit fees paid to other European countries. Naftogaz Ukrainy is currently attempting to nullify this contract and double the agreed-upon transit fee. This desperate act puts at risk the stability of Gazprom’s natural gas supplies to Europe, something which Gazprom deeply deplores and for which it cannot be held in any way responsible.

On the issue of gas prices, the prime ministers of Russia and Ukraine, on 2 October, 2008, signed a memorandum of understanding on direct, long-term contracts and gradual price increases.  The agreement set up a step-by-step, three-year period for Ukraine’s transition to purchases of Russian natural gas to market prices.  Ukrainian Prime Minister Yulia Tymoshenko said at the time, “The parties confirmed their willingness to establish a gradual transition to market prices within three years.”  Despite these assurances, Ukraine refused Gazprom’s offer of $250 per 1,000 cubic meters, nearly half of what Gazprom charges its western European customers. 

Gazprom has taken every possible step to find a mutually acceptable solution, and to bring and keep both sides at the negotiating table. This is in spite of threats by Ukrainian government officials to call off talks in the final hours and reversals by Naftogaz Ukrainy on steps to transitioning Ukraine to market prices for gas.

Gazprom will continue to work hard with Naftogaz Ukrainy and our European partners to find a resolution that is both fair and commercially viable.  Gazprom will also do everything it can to ensure that all volumes destined to our European customers are delivered in full.

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During a press conference today Gazprom Deputy Chairman and Gazprom Export CEO Alexander Medvedev and Gazprom spokesman Sergei Kupriyanov gave the following comments:

• Naftogaz Ukrainy has recognized the $2bn debt it owes Gazprom and had the money to pay that debt.
• Rosukrenergo has received $1.5bn, which Gazprom is yet to receive
• Gazprom is very concerned about the situation in particular as Naftogaz Ukrainy has announced it may confiscate transit gas to Europe.
• The existing transit contract with Ukraine is valid through to 2010 and which obliges Ukraine to transit at least 110 bcm of gas per year. Gazprom pays Ukraine a fee of $1.60 per 100 km, which is comparable to transit fees paid to other European countries.
• Talks with Naftogaz Ukrainy are to continue and a contract may yet be signed at last minute.
• Gazprom has offered Naftogaz Ukrainy a discounted price for gas deliveries in 2009.
• If there is no contract signed for future gas deliveries, then there is no legal basis for Gazprom to deliver gas to Ukraine.
• The existing contract for gas deliveries to Ukraine ends tomorrow, 1 January 2009, 10am Moscow time.
• Gazprom hopes for the best, but prepares for the worst.
• Gazprom is in constant contact with its European partners.