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Weapons of Mass Destruction (WMD)

Gazprom Implements Prepayment Delivery Scheme For Russian Gas to Ukraine Over Arrears

RIA Novosti

11:14 16/06/2014

MOSCOW, June 16 (RIA Novosti) - Russian gas giant Gazprom at 10:00 a.m. local time (06:00 a.m. GMT) implemented a prepayment plan for the delivery of Russian fuel to Ukraine's Naftogaz, according to a company statement on Monday.

'The decision was made because of the chronic non-payment by Ukraine's Naftogaz. Arrears by the company for Russian gas deliveries stand at $4.458 billion,' the statement reads.

The statement said that $1.451 billion is owed for November-December 2013, and $3.007 billion for April-May 2014.

From now on, the Ukrainian company will only receive the amount of gas it will have paid for in advance. No payments have been received for June preliminary bill, yet. The latest price proposed by Russia stands at $385, which is the average market price Gazprom offered Kiev after axing a deal to subsidize gas exports to Ukraine.

The decision to switch to pre-payment scheme was delayed several times this month, and came into force after the latest round of three-party crunch talks, involving the European Commission, brought no agreement late on Sunday night, with Gazprom reaffirming its unyielding position.

Ukraine has been driving a hard bargain in its pricing dispute with Russia, pressing for a low price of $268.5 per 1,000 cubic meters, which is what it was paying before Gazprom cancelled the rebate. Ukrainian Energy Minister Yuriy Prodan said earlier it was ready to compromise at $326, and After the Sunday talks, Prodan said government in Kiev was ready for a halt to Russian natural gas supplies.

Ukraine's gas debt to Russia has been building up since 2013 as the country found itself amid a deep political crisis. Naftogaz' discounted rate was scrapped in April after Kiev failed to deliver on its debt, which now accumulates at a rate of some $1 billion per month.

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