By Alexander Kolyandr
MOSCOW--The European Union has failed to broker a truce to
resolve the long-running natural gas dispute between Russia and
Ukraine at high-profile talks Friday, though the Kremlin said gas
supply to Europe should be safe this winter.
EU energy chief Günther Oettinger traveled to Moscow to discuss
a possible interim deal with Russian Energy Minister Alexander
Novak ahead of three-way talks, which it is hoped will take place
next week.
The talks coincide with a sharp escalation in the conflict
between Russia and Ukraine. On Thursday, Ukraine accused Russia of
invading the country, saying Russian troops seized the coastal town
of Novoazovsk and other villages along the border.
At Friday's gas talks, Russia repeated its previous offer to
sell gas to Ukraine at a discount of $100 per 1,000 cubic meters of
gas, Mr. Novak said after meeting Mr. Oettinger.
The offer puts the price of a 1,000 cubic meters at about
$386
The Ukraine government rejected the offer several hours after
the meeting, as it did in June, saying it is longing for a deal
derived from the spot market price rather than an oil-dependent
long-term supply price formula, which Gazprom favors.
"We see this price as discriminatory," Ukraine Energy Minister
Yuriy Prodan said in a statement, adding that Kiev has made several
offers, some of them with the European Commission.
Mr. Novak said Russia is still open for gas talks with Ukraine,
but so far Russia has rejected all Ukraine's proposals.
However, no date for a new meeting has been set, while Ukraine
must pay at least $1.45 billion of its debt to Russia's gas
monopoly OAO Gazprom before any talks on the restructuring of the
rest of $5.3 billion debt can start, he said.
The EU has been trying to revive negotiations since they broke
down last June, when Gazprom halted its delivery of gas supplies to
Ukraine over billions in unpaid gas bills from Kiev. Ukraine has
said Moscow unfairly raised gas prices.
Time is of the essence for all sides. Gazprom is losing valuable
income by continuing to withhold gas deliveries to one of its
biggest and most lucrative markets--around half of the government's
revenue comes from oil and gas exports.
For Ukraine's government, the onset of cold winter months could
exacerbate an already very fragile outlook, with the economy
battered by months of turmoil and civil war continuing in the east
of the country. The government said last month that businesses
might be forced to reduce energy consumption in the case of gas
shortages. In the worst-case scenario, people could be left without
heat and power in their homes.
The EU, for its part, is determined to avoid a repeat of 2009
and 2012, when pricing disputes also led to supply disruptions in
some EU countries at the height of winter. Ukraine is the main
transit route for Russian gas supplies to the 28-member bloc, which
relies on Russia for over a third of its gas imports. Six
countries, including Bulgaria and Slovakia, are wholly dependent on
Gazprom for their gas supplies. However, all the sides say now that
the flow of gas won't be interrupted.
Mr. Oettinger and Mr. Novak said a some kind of a temporary
solution of the price dispute should be found to enable Ukraine to
pump about 10 billion cubic meters of gas into its underground
storage to prevent shortages this winter.
The two energy chiefs said European gas supply isn't in danger
of being cut off, as all sides remain committed to a secure supply
of energy.
Vanessa Mock in Brussels contributed to this article.
Write to Alexander Kolyandr at Alexander.Kolyandr@wsj.com
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