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OFFICIAL WEBSITE OF THE GOVERNMENT OF THE RUSSIAN FEDERATION

Dmitry Medvedev’s meeting with Energy Minister Alexander Novak and Gazprom CEO Alexei Miller

Dmitry Medvedev: "But we shouldn’t close the window for dialogue. If our Ukrainian colleagues open their ears to reason and resume discussions of the highly-profitable offer – yes, highly-profitable – that we have made to them, I think we will be ready to talk, but only if they repay their debt in full."

Transcript:

With Gazprom CEO Alexei Miller and Minister of Energy Alexander Novak

Dmitry Medvedev: For the past several days and even weeks, the Government, and primarily the Ministry of Energy and Gazprom, have been conducting difficult talks with Ukraine on the gas debt and conditions for future cooperation. Unfortunately, we have not succeeded. Yesterday, you (addressing Alexei Miller) met with Ukrainian government leaders. Please tell us in detail what you discussed and why Gazprom had to introduce a prepayment system for natural gas deliveries to Ukraine today.

Alexei Miller: Yesterday we held the last round of trilateral consultations with the European Commission, and last night we met with the Prime Minister of Ukraine, Mr Yatsenyuk. I must say that we had to introduce the prepayment system today due to the contentious position of the Ukrainian government. Our Ukrainian partners continued to substitute the actual issue on the agenda with other issues, because the problem in our relations with Naftogaz, which is our gas partner in Ukraine, concerns its chronic debt for Russian gas deliveries.

Alexei Miller: "I must say that we had to introduce the prepayment system today due to the contentious position of the Ukrainian government. Our Ukrainian partners continued to substitute the actual issue on the agenda with other issues, because the problem in our relations with Naftogaz, which is our gas partner in Ukraine, concerns its chronic debt for Russian gas deliveries."

Ukraine’s current debt to Gazprom is approximately $4.5 billion and they have not paid for another 11.5 billion cubic metres of delivered gas. We requested that Ukraine pay its debt for November and December ($1.451 billion), and show progress in repaying its debt for April and May, which is $500 million. We offered to meet our Ukrainian partners halfway, because the part of the debt we wanted them to pay to avoid this prepayment system was smaller than the debt for that period. This is the first thing. Second, we did not link the $500 million we requested for April and May to any gas price, because, as we said, Ukraine would have had to pay much more than $500 million for that period at any price.

But Ukraine has taken a stand that cannot be described as anything other than open blackmail or the substitution of terms and of the issue on the agenda. The Ukrainian government leaders and in particular the prime minister demanded that Gazprom and Russia sell gas to Ukraine at a very low price, nearly as low as for its Customs Union partners. They said that if we don’t agree to this Ukraine would not repay its gas debt and would continue to take gas without any payment, and as much as it wants.

Alexei Miller: "Ukraine’s current debt to Gazprom is approximately $4.5 billion and they have not paid for another 11.5 billion cubic metres of delivered gas. We requested that Ukraine pay its debt for November and December ($1.451 billion), and show progress in repaying its debt for April and May, which is $500 million."

Of course, these demands and conditions are unacceptable to Russia, which is why we introduced the prepayment system for gas supplied to Ukraine starting at 10 am today. This means that starting today we will only ship as much gas to Ukraine as Naftogaz pays for.

Dmitry Medvedev: So what did you proposed to our Ukrainian colleagues recently? First, we offered them the opportunity to repay its accumulated debt with instalments. Second, Russia, including Gazprom and the government, proposed calculating the price without the export duty, which would have allowed Ukraine to buy gas on the same conditions as before, when Mr Yanukovych was Ukrainian president. In other words, these conditions are comparable to the discount reached under the agreement on the Russian Black Sea Fleet, which reduced the price to $385.

What other corporate proposals did you make to Ukraine?

Alexei Miller: "The offer we made to Ukraine was even better than the gas supply conditions under which the Yanukovych government bought gas."

Alexei Miller: The offer we made to Ukraine was even better than the gas supply conditions under which the Yanukovych government bought gas. First, we said we would pledge not to change the $100 discount per 1,000 cubic metres of gas, and ultimately we offered to guarantee that this discount would be honoured until the end of the contract in late 2019. This was our first offer. Secondly, we actually offered our Ukrainian colleagues a chance to disregard the take-or-pay provision in 2014. Indeed, Ukraine’s economic situation is critical, and we understand that Naftogaz Ukraine will find it difficult, if not impossible to take the minimum required amount of gas, which is 41.6 billion cubic metres annually. First we discussed reducing it to 34 billion cubic metres, and then to 27 billion, but ultimately we suggested that Ukraine take as much gas as it could in 2014 at $385 per 1,000 cubic metres. These are better conditions than Ukraine had under Yanukovych.

Alexei Miller: "Today Gazprom filed a lawsuit with the Arbitration Institute of the Stockholm Chamber of Commerce to recover Ukraine’s $4.5 billion debt for gas."

Dmitry Medvedev: In other words, you offered them highly-favourable conditions that are better even than those under the previous president. But they have not accepted the offer and have artificially created a gas crisis. This is deplorable and really sounds like blackmail. I think that eventually this will boomerang back on the interests of the Ukrainian economy, and so these actions are absurd and unreasonable. On the other hand, why should I be surprised, after the indecent behaviour of the Ukrainian Foreign Minister? It’s bad that this will have a direct and immediate effect on the Ukrainian economy and on the people who live in Ukraine.

Mr Novak (addressing Alexander Novak), you attended these talks, in particlar the trilateral talks with the European Commission and its Commissioner for Energy, Mr Oettinger. I believe that the European Commission at least tried to help these talks by urging Ukraine to take a constructive stance, but it has not succeeded.

What are your conclusions?

Alexander Novak: Yes, we have held seven rounds of trilateral talks between Russia, the EU and Ukraine. We saw that the European Commission was interested in settling the issue before the winter heating season. We saw them working actively within the framework of the talks. The talks were held late at night and, in general, at any time that we agreed on.

During these difficult talks, with Ukraine taking a destructive stance, the European Commission supported the majority of our proposals. One issue concerned the need to repay without delay the incontestable $1.451 billion debt for November and December, and to start paying for the gas delivered in April and May. We also came to an agreement on a debt repayment system and on the price that Gazprom offered to Naftogaz. The price we suggested was described as an acceptable basis for subsequent talks on the issue of future deliveries.

However, we also saw that the European Commission had no levers of influence on Ukraine to ensure that we find a solution and a compromise. On the other hand, we reached a degree of understanding at these talks.

Dmitry Medvedev: "But we shouldn’t close the window for dialogue. If our Ukrainian colleagues open their ears to reason and resume discussions of the highly-profitable offer – yes, highly-profitable – that we have made to them, I think we will be ready to talk, but only if they repay their debt in full."

Dmitry Medvedev: It appears that there is a disturbing factor that is not connected with the European Commission, a factor involving third parties that are influencing the situation. In the event of such conflicts, it’s customary to settle the issue in a court. What has Gazprom done in this respect?

Alexei Miller: Today Gazprom filed a lawsuit with the Arbitration Institute of the Stockholm Chamber of Commerce to recover Ukraine’s $4.5 billion debt for gas. It’s possible that we may file more lawsuits soon.

Dmitry Medvedev: Right, settle the issue in court. If our colleagues refuse to listen to the voice of reason, we will have to uses legal arguments, the more so as all arguments in this dispute are definitely in Gazprom's favour, which has been supplying natural gas to Ukraine free of charge for a long time.

But we shouldn’t close the window for dialogue. If our Ukrainian colleagues open their ears to reason and resume discussions of the highly-profitable offer – yes, highly-profitable – that we have made to them, I think we will be ready to talk, but only if they repay their debt in full.

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