Ukrainian Prime Minister Arseny Yatsenyuk said on March 11 that Kiev is planning to discuss a “summer package” of natural gas supplies with Russia and the European Union on March 20.
“On March 20, we are planning to hold the three-party talks over natural gas supplies to Ukraine,” Yatsenyuk told a cabinet meeting.
During the negotiations, Kiev would seek a price of $250 to $300 per 1,000 cubic metres for gas to be delivered to Ukraine starting from April, Yatsenyuk said.
Under a “winter package”, which runs out on March 31, Kiev pays $329 per 1,000 cubic metres of gas it imports from Russia in the first quarter of 2015.
The “winter package” reached between the two sides last October in Brussels under the mediation of the EU, has allowed the resumption of Russian gas supply to Ukraine after an almost five-month gas cutoff.
In June 2014, Russia stopped all gas supplies to Ukraine as the two sides failed to reach an agreement on payments.
Earlier, Ukrainian President Petro Poroshenko said his country has significantly reduced its energy dependence on Russia and will be buying natural gas at $245 per 1,000 cubic metres this year.
“We have lived through the winter and purchased only 2 billion [cubic metres of gas]; our latest procurement cost less than $300 [per 1,000 cubic metres] and Russia eventually had to request a 68% increase in gas flow, which crashed the gas market. Now we will be buying gas at $245 [per 1,000 cubic metres] via reverse flows,” Pershyi Natsionalnyi Channel quoted him in an interview on March 9. The gas that is sent to Ukraine via reverse flow pipelines is Russian gas that is re-exported to Kiev from EU member states.
Ukraine has fully diversified the gas delivery mechanism. “We have been talking about this and dreaming of this for 23 years. We, my team have done it,” Poroshenko said.
Ukraine has increased the amount of gas collecting in its underground storage facilities to 23 million cubic metres per day compared with 8 million cubic metres in February, according to the data provided by the GSE association on March 10.
Ukraine currently receives reverse deliveries of natural gas from Slovakia, Hungary and Poland.
In related news, the International Monetary Fund said that energy sector reforms and the addressing of “deep-rooted” structural issues in Ukraine will return the country’s economy to growth.
The IMF announced it approved the immediate disbursement of about $5 billion to Ukraine, with a little more than half of that allocated to budget support for the former Soviet republic.
The Ukrainian administration that took over in the wake of political upheaval in late 2013 said the economy was left in shambles by former President Viktor Yanukovych. More than a year later, the IMF said real gross domestic product is expected to contract by 5.5%.
Gripped by conflict and interference by its former Soviet patrons, the IMF nonetheless said some of the onus lies with Kiev. “Addressing deep-rooted structural problems is critical to create an enabling environment for investment and private sector activity,” acting IMF Chairman David Lipton said in a statement on March 11.
That sentiment was backed earlier last week by Victoria Nuland, assistant US secretary of state for European affairs, who told lawmakers in Washington the leaders in Ukraine were “in a race against time” to enact the reforms necessary to reboot the nation’s economy.
For the IMF, addressing reforms in an energy sector plagued by debt and pressured by its Russian counterparts is paramount for success. Lipton said Ukrainian authorities plan to eliminate the debt carried by state-controlled energy company Naftogaz by 2017 in part by fundamentally restructuring the company.
The performance of Ukraine’s energy sector is a vital concern for a European market as 20% of the Russian natural gas headed west runs through the Soviet-era pipeline network in Ukraine. The IMF said Ukraine’s economy is expected to return to growth as early as next year, when real GDP is expected to grow by 2%.