The meeting was held to discuss Russian-Ukrainian natural gas supplies.
Transcript of the beginning of the meeting:
With Gazprom CEO Alexei Miller and Minister of Energy Alexander Novak
Dmitry Medvedev: I wish we could talk about something more pleasant, like the outlook for cooperation with China, which we have recently discussed. However, the subject of this meeting and the decisions we need to take concern natural gas cooperation with Ukraine. Mr Miller (Alexei Miller, Gazprom CEO), what is the status of this cooperation? Have the Ukrainian consumers changed their stance? What do they propose?
Alexei Miller: Mr Medvedev, Ukraine should have paid for April gas deliveries on 7 May, but it has not paid a single dollar. As a result, its overall debt to Gazprom has reached $3.508 billion. In physical terms, which include last year’s debt, Ukraine owes us for 9.420 billion cubic metres of gas, which is a huge amount.
Dmitry Medvedev: Can you provide a comparison?
Alexei Miller: This amount is comparable to Gazprom’s annual gas supplies to Poland. In other words, Ukraine’s debt to us is comparable to a year of free gas supplies to Poland.
The existing contract has a provision that allows Gazprom to demand prepayment. We can send a provisional invoice to Ukraine by 16 May, demanding full advance payment for June deliveries. If Ukraine pays half of the required sum, we would supply gas to it for the first two weeks of the month, in accordance with the amount of payment, and would stop supplies in the second half of the month.
On the other hand, it cannot be said that we would stop deliveries, because we would supply as much gas as Ukraine pays for in accordance with the provisional invoice. In other words, if the decision to use the prepayment provision is approved, we will supply as much gas to Ukraine in June as it buys.
Gazprom can do this. Ukraine owes it $3.508 billion. It paid for gas, even though not in full, at the beginning of the year, but it has not transferred a single dollar for the March and April deliveries.
Dmitry Medvedev: Not at any price?
Alexei Miller: No. Moreover, the bulk of its debt, $2.5 billion, is what it owes us for gas supplied at the preferential price of $268.50 per cubic metre. This is a discount price, but Ukraine has not even paid for these discount deliveries.
Dmitry Medvedev: I see. And Gazprom has the right to do what it has warned Ukraine about more than once: switch it to a contractual system of advance payments. I think it’s time to stop babying them. Let them know and introduce advance payments tomorrow. I believe Gazprom has done everything necessary to settle this problem in a different way. We addressed them and held several consultations on this score; you reported to me and the President but they turned a deaf ear. In this case we should start acting because we cannot tolerate this any longer.
What will happen next? You’ll report this to the media and to all consumers who receive these supplies… After being switched to advance payments… As you said, Mr Miller, this would mean only one thing: supplies won’t be discontinued. We’ll supply them with as much gas as they pay for. If they pay one euro, they’ll receive one euro's worth of gas; if they pay one million euros, they’ll receive one million euros' worth. This is how it’ll work.
Alexei Miller: Tomorrow Gazprom will issue a proforma invoice for gas in June in line with the contract and will send a letter to notify Naftogaz of this move. Considering that 1 June is a Sunday, Ukraine should pay for its June gas supplies before 2 June. If it fails to do so, Gazprom will notify Naftogaz before 10 am on 3 June what amount of gas will Ukraine receive based on its advance payment. If Ukraine doesn’t pay, it will receive nothing in June. But let me repeat that we are not stopping gas supplies to Ukraine. The supplies strictly depend on what Ukraine pays in advance for June.
Dmitry Medvedev: I see. But Ukraine still has a chance to pay before the end of May, to deposit some money and start talks with Gazprom on this score; in other words, demonstrate its readiness to pay off their debts. For the time being we don’t see this intention on its behalf and this is very sad.
In the meantime, our Ukrainian partners do have the money, as far as I understand. You’ve just come back after talks attended by Ukrainian representatives and the relevant European commissioner. We also know that the International Monetary Fund (IMF) has transferred money to Ukraine as part of one of the first tranches.
What did you talk about? What did you agree on, if anything? Mr Novak, go ahead please.
Alexander Novak: On 2 May we held consultations with Guenther Oettinger, EU Commissioner for Energy, who represents 13 countries receiving Russian gas via Ukraine. The meeting was attended by Ukrainian Energy Minister Yury Prodan. We discussed three main issues that the President raised in his letter to the leaders of countries receiving gas. The first one was about payment of debt for gas that has been supplied, and payment guarantees for current supplies.
The second issue was about reliability of gas transit under the contract between Gazprom and Naftogaz (transit of gas to European consumers) and the pumping of gas into underground gas stores.
The third issue was a systemic one. It concerned the condition of the Ukrainian economy in general and ways of increasing its ability to pay for the current supplies and the pumping of gas into underground stores in preparations for the winter season.
Regrettably, we haven’t received any specific proposals from the European Commission as regards gas payment measures that it will take along with the European Union countries and Ukraine itself. We’ve just received a report on zero payment for the April gas supplies. Moreover, Prodan came up with the alarming news that Ukraine doesn’t guarantee the pumping of gas into underground stores in summer or its transit to Europe because it doesn’t have the necessary resources and is in principle reluctant to resolve this issue now.
As you’ve rightly said, on 30 April the IMF decided to grant Ukraine a loan of $17.1 billion for two years. Ukraine has already received the first tranche of $3.2 billion. At the meeting we received no guarantees and heard no statements as to what part of this sum will be spent on the current supplies or the payment of debts for the previously delivered gas.
I’d like to point out that the European Commission is deeply concerned about this situation. At the meeting, Mr Oettinger spoke about the current Gazprom-Naftogaz contract and Ukraine’s debt for the supplied gas. These talks show that we must continue the discussion because, regrettably, this issue has not yet been resolved.
Dmitry Medvedev: Let them discuss this issue with whomever they want – I mean our European Commission partners – but for us it is abundantly clear and is not a subject for discussion. There is a debt and it must be paid off. The only thing we can hope for is for our aforementioned partners and relevant Euro commissioners to still bring it home to the Ukrainian leaders if these leaders are so attentive to what they say that debts must be paid off. This issue shouldn’t be turned into a subject of endless talks that we’ll do this or that. The debtor should pay the owed sum or transfer a sufficient sum of money to demonstrate its willingness to pay. Mr Novak, I’d like to ask you to explain this position to our partners, both in Ukraine and the European Commission. Otherwise we’ll simply have nothing to discuss because all current debates lead us nowhere. Please, bring this position home to those who are in charge of this issue. I understand some consultations are still going on now?
Alexander Novak: At present talks and consultations are being held in Brussels at the level of department directors with a view to preparing for the next meeting of ministers and European commissioners.
Dmitry Medvedev: Okay. Let these consultations continue and department directors meet. You’ll also continue the dialogue but this won’t change what I said to Mr Novak: switch Ukraine to advance payments tomorrow.
Alexander Novak: Okay.
Dmitry Medvedev: Thank you.
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