Trilateral gas talks with Ukraine.
Dmitry Medvedev: I’d like Alexander Novak to update us on efforts to settle Ukraine's gas debt. He worked all night with the European Commission and has just flown in. How are things going? Is there any chance of reaching an agreement?
Minister of Energy Alexander Novak
Alexander Novak: Mr Medvedev, colleagues, indeed we continue to hold talks. Another round of trilateral consultations and negotiations was held yesterday. I would like to note that we’ve agreed on basic terms of a temporary so-called winter package, whereby we will resume gas supplies from November to March. We’ve retained the positions which we previously stated and upheld.
Our first basic term is about paying the accumulated debt for gas supplied in November and December 2013 and April, May and June 2014. In accordance with our agreements, a portion of the debt in the amount of $3.1 billion will be paid before the end of 2014, with $1.45 billion to be paid within the next few days prior to the start of supplies in November, and the balance in the amount of $1.65 billion will be paid before the end of December.
We have agreed on a price that will be based on the price set by the 2009 contract signed by Gazprom and Naftogaz Ukraine, with a discount of $100 according to the formula set forth in this contract. This discount was used in our previous arrangement with Ukraine. It represents Russia’s contribution to settling the gas dispute, as well as a contribution to Ukraine’s economy overall.
Payment terms are part of the basic terms. The position of the Russian side regarding prepayment has remained unchanged, meaning that all future deliveries during the winter must be pre-paid. The take-or-pay arrangement will not apply during this period, which we also agreed upon earlier.
I also wanted to say that the Ukrainian side confirmed the availability of funds to pay for four billion cubic metres of gas to be supplied in November and December. The European Commission and National Bank of Ukraine worked on this issue last week in conjunction with international financial institutions, the IMF and EBRD, to name a few, and have at least officially stated that they are ready to pre-pay for the purchase of four billion cubic metres of gas.
Thus, the basic terms and conditions to resume gas supplies to Ukraine during the winter have been agreed.
With regard to drafting the necessary documents to incorporate these agreements, we will prepare a package of documents, including this additional agreement to the existing contract between Naftogaz Ukraine and Gazprom, which will specify technical aspects of daily supplies and include a mechanism for confirming applications and procedures governing the execution of these applications.
With regard to other documents, two protocols will also be signed in accordance with our agreements, including a protocol between the European Commission, Russia and Ukraine on the terms for resuming gas supplies during the winter, which will spell out the entire set of prerequisites for resuming gas supplies that I just mentioned. The other protocol was signed by the European Commission and Ukraine on financial guarantees provided by the European Commission to Ukraine for gas and debt restructuring payments.
I would like to mention the positive role played by the European Commission, which agreed with almost all our proposals. In this regard, we have no disagreements whatsoever.
With the good will of the Ukrainian side and proper finalisation of the documents I just mentioned, we could reach a final agreement and sign the documents fairly soon. We agreed that this can be done today, if the documents are finalised and ready for signing. That concludes my report.
Dmitry Medvedev: Thank you, Mr Novak. It's a tough job really, especially in these circumstances. Nevertheless, it speaks to our willingness to contribute to calming the situation in Ukraine, particularly in the Ukrainian economy, which is in a very bad situation. It’s imperative to come up with a conclusive solution.
It’s good that we’ve retained all our original basic approaches to determining the contract price, the pricing mechanism and the capabilities that we can use. It’s also good that we agreed on things that we will not do – meaning the price has remained at the level proposed by the Russian side – and, of course, on the need to fully repay the debt, even if by instalments.
I hope that with the active participation of our European partners, you will be able to reach a final agreement, because it’s good for Ukraine and for European gas supplies, especially since the gas heating season is underway. Thank you. Keep working and report back to me later today.
