Gas flow to Europe might stop by the end of June - Putin

03 June, 2009, 19:59

Unresolved payment issues with Ukraine could see the suspension of gas deliveries to Europe by the end of June according to Prime Minister Vladimir Putin, speaking at the conclusions of Russian – Finnish talks.

The Prime Minister stressed that in the current economic environment, Russia is unable to continue providing loans to Ukraine to enable it to buy Russian gas.

"No one in Russia is intending to rejoice or gloat over Ukraine's difficulties in paying for the product it receives from us,” Putin said in Helsinki. “But we cannot pay for this either."

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The Prime Minister noted that, currently, the European Union does not intend to help Ukraine pay for gas, and added that Gazprom may stop gas deliveries if contract terms are violated. Putin went on to state that under the terms of the resolution to the January gas conflict between the two nations, Gazprom has the right to demand advance payment in the event of any payment delays, adding that in this event the Russian gas export monopoly would be delivering "exactly the amount that will be paid for in advance," and that there will be effects on downstream consumers.

"I want to stress that without pumping gas into its underground storage facilities, Ukraine won't be able to survive and will be forced to tap gas from its export pipelines. It will be forced to do this, you can't even blame them for it," he said.

Need for cooperation

The Prime Ministers comments came after Russian president Dmitry Medvedev on Wednesday delegated Vice Prime Minister Igor Sechin to conduct negotiations with Ukraine and the European Union on the payment for Russian gas transported through Ukraine.

The President emphasised that all affected parties should be party to the negotiations affirming "We should continue contacts with our European partners, with Brussels, with the country presiding in the European Union, and Ukrainian colleagues," and stressing that he saw the issue as “Not a problem of only Russia and Ukraine,” but rather, “a problem of gas supplies to third European countries".

Sechin added that proposals have been submitted to key stakeholders on coordinating approaches to payment problems.

"We have appealed to Barroso, the president of the European Commission, as well as the president of the Czech Republic, the prime minister of Sweden and Ukrainian Prime Minister Yulia Tymoshenko on coordinating these efforts."

Sechin also stated that Russia will not be able to provide a $4.2 billion loan to Ukraine to fund the purchase of 19.5 billion cubic meters of gas for its underground storage facilities, after noting that it had already prepaid transit fees for Russian gas crossing Ukraine to Europe until February 2010.

The Vice Prime Minister warned that Russian monitoring of gas shipments had determined that Ukraine hadn’t been putting gas into its storage.

"We have intensified monitoring over the transit of Russian gas to Europe,” he said. “This monitoring shows that, unfortunately, Ukraine has so far not begun pumping gas into underground storage facilities. This may create problems with gas deliveries during the wintertime."

Ukraine pays for Russian gas on the 7th of each month. A new agreement, covering gas deliveries between 2009- 2019, permits Gazprom to shift to prepayment should Ukraine fail to pay on time for the gas it received in May.

Although Russia expressed its doubts over Ukraine’s ability to do so, Ukraine’s Energy Minister, Yury Prodan, assured participants that Ukraine will be able to meet the deadline.

“We have time until June 7 and we will find the money,” he said.