Ukraine Suspends Purchases of Russian Natural Gas

DJ Ukraine Suspends Purchases of Russian Natural Gas -- Update

By Naftali Bendavid

     BRUSSELS--Insufficient "political will" was to blame for a breakdown in talks that would have allowed Ukraine to
buy natural gas from Russia for the rest of the year, Maros Sefcovic, the European Union's energy chief, said
Wednesday.

     "We really did our utmost to get the parties together," Mr. Sefcovic said. "I was coming to Vienna with good
answers to all the questions which were put on the table. But what we lacked in the end was enough of the political
will."

     Saying a final negotiating session on Tuesday had been "difficult," Mr. Sefcovic added, "I would not hide that we
hoped that we would come back with better news." The two sides plan to renew talks later this year.

     The European Commission, the EU's executive body, mediated the talks in Vienna between Ukraine's state oil and gas
company, OAO Naftogaz, and Russian gas giant OAO Gazprom.

     Mr. Sefcovic issued a statement late Tuesday saying the two sides were "still far apart" on a deal. Naftogaz said
Wednesday it was suspending natural gas purchases from Gazprom due to the inability to reach an accord.

     Officials stressed that Ukraine and the EU aren't in danger of running out of gas.

     The EU gets about one-third of its gas from Russia, and about half of that is transported through Ukraine. The
conflict in eastern Ukraine, and the broader standoff between Moscow and Kiev, has put those deliveries in doubt.

     Naftogaz said it would allow deliveries to Gazprom clients in the EU and Turkey. And Mr. Sefcovic said
preparations--especially reverse-flow arrangements with Hungary, Slovakia and Poland--ensured that gas supplies in
Ukraine won't be "endangered."

     Ukraine needs an additional 7 billion cubic meters of gas for the winter, and the reverse flows can supply about
1.8 BCM a month. "We have the capacity, we have the time, and we have the gas," Mr. Sefcovic said.

     The apparent cause of the talks' breakdown was price. Russia put forward a rate of $247.18 per thousand cubic
meters, which it said was in line with regional prices, but Ukraine found it too high.

     But Mr. Sefcovic suggested that in the end the differences were political rather than technical. Russia and
Ukraine are engaged in a bitter military and political confrontation, as Kiev clings to a shaky cease-fire with
Russian-backed separatists in eastern Ukraine.

     "I think you see my frustration. I am not hiding it," Mr. Sefcovic said. "The lack of will was clearly
demonstrated on both sides."

     Experts from both sides hope to meet again in late August, and political leaders aim to reconvene in September.

     Naftogaz said it is prepared to renew gas purchases from Gazprom once "a comprehensive temporary agreement" had
been reached, preferably one that lasts until at least March 31.

     Stephen Fidler contributed to this article.

  Write to Naftali Bendavid at naftali.bendavid@wsj.com


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  (END) Dow Jones Newswires

  July 01, 2015 07:48 ET (11:48 GMT)

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