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Dmitry Medvedev meets with Energy Minister Alexander Novak and Chairman of the Gazprom Board of Directors Alexei Miller

Excerpts from the transcript:

Meeting with Energy Minister Alexander Novak and Chairman of the Gazprom Board of Directors Alexei Miller

Dmitry Medvedev: I called you to discuss gas supplies and some other aspects of cooperation with Ukraine, primarily in the energy sphere.

Let’s start with the gas issue. What are the problems there?

Alexei Miller: Ukraine made an advance payment for one billion cubic metres of gas in January of 2015. As of today, we’ve supplied Ukraine with a little over 600 million cubic metres of gas. These supplies are part of the so-called winter package. Ukraine, the European Union and Russia reached an agreement on this package on 30 October of last year. Under this agreement, we supply gas to Ukraine, provided it pays its debt of $3.1 billion for November-December 2013, and April, May and June of 2014. During this period, we supplied Ukraine with 11.5 billion cubic metres of gas worth $5.3 billion.

Ukraine fulfilled its commitments, and prior to the winter package supplies, paid off $1.45 billion of debt; last year it paid $1.65 billion of debt. All together this is a total of $3.1 billion. But this is only a fraction of the debt. Today Gazprom sent to Naftogaz Ukrainy a letter about the outstanding debt of $2.196 billion. Also, Ukraine will have to cover penalties for all overdue payments in accordance with the terms of the contract signed on 21 January 2009. The terms of the winter package will be in effect until the end of March 2015. Starting 1 April, the discount granted by the Russian Government will no longer apply, and Ukraine will be supplied with gas strictly under the contract.

Dmitry Medvedev: Debts should, of course, be repaid. We proceed from the assumption that our agreements can only be fulfilled properly if debts are paid. As for supplies starting 1 April, we agreed that the aforementioned discount would apply for a certain period. After this, the provisions of all current contracts will remain valid, and prices should be locked-in on the basis of major gas agreements between Russia and Ukraine. Naturally, we are open for the most diverse cooperation options, but this approach should be used in the future.

Alexei Miller: The total debt (the primary debt plus penalties) is about $2.44 billion.

Dmitry Medvedev: This is yet another reminder that it is time to pay for the current debts. This is all the more important since our Ukrainian colleagues are engaged in active search for funds to support their own economy and, as we hope, pay the existing debts, because without this it is impossible to ensure normal funding of the economy and steady operation of Ukraine’s fiscal system.

We have a number of other issues that exist at the junction of our relations with Ukraine, on the one hand, and the European Union, on the other. A Vice-President of the European Commission visited Russia not so long ago to discuss reliability of supplies and transit. Could you tell us in brief what the discussion was about? 

Alexander Novak: On 14 January, upon our mutual agreement, European Commissioner for Energy Union Maroš Šefčovič visited Moscow to discuss issues related to energy cooperation. Last year, the Russia-EU energy dialogue was suspended on the initiative of the European Commission. We discussed with the Vice-President of the European Commission the possibility of resuming such an energy dialogue, and agreed that we will come up with a proposal regarding the format of the dialogue within a month. This includes the work of the theme-specific and the advisory groups, as well as the resumption of the Permanent Partnership Council’s activities. We have also discussed the full range of our energy cooperation. One of the issues that came under our scrutiny concerned the construction of an energy infrastructure for reliable Russian gas supplies to European countries. As of late 2014, Russian gas accounted for 62 percent of gas imports by European countries; therefore, infrastructure development is high on our agenda. I informed the Vice-President of the European Commission that Russia was forced to stop the South Stream construction. We have fulfilled all our obligations under the intergovernmental agreements signed by Russia and the European countries through the territory of which the South Stream was supposed to pass. At the same time, in 2011-2014, the European Commission was consistently taking steps designed to prevent the implementation of this infrastructure project. In 2014, the European Parliament adopted two resolutions explicitly prohibiting the implementation of the South Stream project in countries with which we had signed intergovernmental agreements. Furthermore, the necessary permits for laying the pipeline across the seabed and the land were not issued on time. In this regard, Mr. Šefčovič was informed that in December, Russia decided to build a new pipeline through Turkey and to build a hub on the Turkey-Greece border, with gas supply volumes to the hub in the amount of 63 billion cubic metres. Today, Gazprom is already working on this project in conjunction with its Turkish partners. This work is fully compliant with the European regulations, which is what the European Commission wanted. Since the transit contract expires in 2019, and the gas supplies to European consumers will be provided, as I said, on the border between Turkey and Greece, the European Commission should, in conjunction with the consumer countries (this includes southeastern and central Europe), decide as soon as possible on developing its own infrastructure in order to be able to deliver corresponding amounts of gas to the European consumers.

We believe that this must be done as soon as possible, because it takes more than one year to implement such major projects. To make sure that gas becomes available in the near to medium term, it is necessary to start the work already today.

Dmitry Medvedev: I would like once again to note that the South Stream was a good project, and we worked on it very seriously. Russia’s decision was not political, and was certainly not emotional. It was a legal decision, because all our attempts to get started have, in fact, failed. We were forced to abandon the project. This is the story of this project, and the decisions that were taken by Russia but were not taken by the European Commission.

We are ready to cooperate, but on conditions which we can agree on.

Returning to Ukrainian issues, we have agreed on electric power supplies. How are things going now?

Alexander Novak: In late 2014, contracts were signed for power supply from Russia to Ukraine, and from Ukraine to Crimea. Accordingly, work is being performed under contracts, and Russia is supplying electricity in the amount of up to 1,500 MW at the request of Ukraine (depending on the needs of the Ukrainian side) at a discounted rate. This is Russia’s way of supporting the Ukrainian economy. These contracts have been signed for one year in order to ensure a reliable power supply to our customers in the Crimean Federal District and our Ukrainian partners who need power supply.

Dmitry Medvedev: This is really a way to support the Ukrainian economy and the Ukrainian energy system. But it is also necessary in order to ensure a reliable power supply to the Crimean Federal District. Once again, please note that we supply power there at the Russian prices.

However, it's not just about electricity and gas. There’s also coal and a number of other products that are necessary for the functioning of the Ukrainian economy. Finally, there's the money. I'm not even talking about 3 billion roubles in a bond loan. Our banking institutions continue to operate in Ukraine. In particular, VTB, our largest state-owned bank, decided to recapitalize its subsidiaries in Ukraine, even though we have different views about what decisions to make or not to make with regard to Ukraine. We operate based on the premise that the Ukrainian people are close to us. We are aware of the position of the President, we are guided by this, and we will continue this work in the future. Everyone should understand that this is the good will of our country, and this kind of support cannot last indefinitely.


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