The price of Russian gas exports to Ukraine is set to rise 12% in the fourth quarter of the year, to leave Kyiv paying £398 per 1,000 cubic metres.Kommersant has reported that Russia is ready to consider a further discount as the two countries' presidents prepare to meet in Moscow.
Kyiv's wants to renegotiate the pricing formula in the gas contract with Russia. Former Prime Minister Yulia Tymoshenko is currently on trial for signing the agreement in January 2009 - just after the last gas distribution conflict which cut off European customers. The contract sets a base price of $450, which is then multiplied by a factor dependent on time lagged oil prices.
Ukraine receives a $100 discount via the Black Sea Accords of April 2010, and transit fees for shipping Russian exports to the EU are also subtracted. With that in mind, it appears that the price before these elements are included will reach over $500, as Gazprom CEO Alexei Miller suggested would happen in the summer.
"According to preliminary calculations, in the fourth quarter of 2011, the price of gas imported by national joint-stock company Naftogaz Ukrainy will be around $398 per thousand cubic meters," a Ulrainian source said, before adding that the final price of Russian gas for the fourth quarter would be announced in early October after a thorough calculation of all of the parts of the formula has been performed.
Meanwhile, Kommersant reports that Russia is considering offering a further 30% discount, according to an unnamed source in the Foreign Ministry, as the sides prepare for a meeting between President's Medvedev and Yanukovych on September 24.
Whilst its a positive that the pair will meet to discuss things face to face, illustrating that the tension has eased somewhat since a series of mudslinging via the media in late August/early September, there are no details on the deal that Moscow is considering, save that the paper writes that the agenda of the meeting will include gas prices for Ukraine and cooperation on the Russia-Belarus-Kazakhstan Customs Union. The Russian Foreign Ministry stated on September 15 that it is ready to defend the current contract in international arbitration should Kyiv take the matter to Stockholm.
Despite assurances from both Russia and Ukraine that there is no risk of another cut off for European customers due to a 'gas war', it seems Brussels is weary of the worry every other year. Hence, it is now negotiating an agreement with Azerbaijan and Turkmenistan to build a gas pipeline across the Caspian, with the ultimate aim of bringing Turkmen gas to Europe, which at this point is only available through Russia. Should the deal with the FSU states go through, it would be a fillip for the struggling Nabucco project, which is plagued by questions of where it would find the gas to fill it.
"Europe is now speaking with one voice, The trans-Caspian pipeline is a major project in the Southern Corridor to bring new sources of gas to Europe. We have the intention of achieving this as soon as possible," EU energy chief Guenther Oettinger said in a statement.
Yulia Tymoshenko is facing a trial in a Kyiv court accused of exceeding her powers when, as Prime Minister, in 2009, she authorized a gas agreement to be signed with Russia that ended a damaging dispute that saw gas supplies disrupted to EU states during winter months. Her trial began on June 24, 2011. On August 5, 2011, she was arrested and taken into detention for contempt of court. Since then, her defense lawyers have had 13 motions rejected by the court for the detention restriction to be lifted so that she can be released on bail.
