Ukraine Halts Russian Gas Purchases

Ukraine Halts Russian Gas Purchases Ukraine Halts Russian Gas Purchases

Ukraine stopped purchases of Russian natural gas after its bigger neighbor took away most of a price discount and declined to sign a three-way accord with the European Union through the heating season.

Ukraine’s gas company NAK Naftogaz Ukrainy will not buy gas from Russia as of Wednesday and will continue purchases from the EU, Energy Minister Volodymyr Demchyshyn said. Russia’s offer to reduce the discount by 60% in the third quarter was not fair, he said by phone after talks with his Russian counterpart Alexander Novak and the European Commission’s vice president for energy union, Maros Sefcovic.

“Naftogaz halts purchase of Russian gas till supply conditions are agreed on,” the company said in a statement after the trilateral talks ended on Tuesday. “Transportation of gas through Ukraine to Gazprom’s European customers will continue in full, according to the contract terms,” Bloomberg reported.

An agreement between the two former Soviet allies would reduce the risk of supply disruption for the EU, which gets 10% of gas through pipes crossing Ukraine from Russia. Payment disputes between the two countries disrupted transit flows to Europe in 2006 and 2009 during freezing weather.

Naftogaz said purchases from Russia can resume after it reaches an agreement with Gazprom on supply conditions through at least the first quarter. The company had insisted Ukraine and Russia sign a trilateral, binding intergovernmental protocol to set an interim supply framework. Russia rejected that.

The government in Moscow agreed on Monday to lower the contract rate for Ukraine by about $40 per 1,000 cubic meters during the third quarter, less than the $100 discount in the second quarter.

That would leave the price, which is linked to oil prices, unchanged against the April-June period at about $247. The offered price is close to what Poland pays Russia, Novak said.