Starting early this morning, Ukraine’s Naftogaz natural gas importer was put on a prepayment scheme by Russian export giant OAO Gazprom for failing to repay $1.9 billion in debt. State-run Naftogaz refused the prepayment plan, and didn’t order any gas, so Ukraine’s shipments halted.
The European Union had been brokering talks between Ukrainian and Russian officials trying to bridge the gap on the issue, which centers around pricing. Gazprom initially wanted to charge $485 per 1,000 cubic meters, the same as it charges to other European nations, while Ukraine sought a price of $268.
Russian President Vladimir Putin proposed $385 as a good middle ground, and the EU was trying to get both sides to agree to something between $300 and $385, but Ukraine refused, and talks broke down last night.
Ukraine Energy Minister Yury Prodan shrugged off questions about the shutoff, insisting Ukraine was fully prepared to manage without any imports of natural gas from Russia, which provides the majority of the nation’s energy.
The other significant problem is that Gazprom’s shipments to the EU go through Ukraine as well, and Gazprom has warned the European Commission of possible disruptions in the event Ukraine tries to siphon gas out of the pipelines.
Ironically, Gazprom was in the process of building an alternative pipeline through the Black Sea into Romania to allow them to bypass Ukraine, but the EU had forced Romania to temporarily block it over bidding questions. Romanian officials had suggested the halt was precipitated by the EU trying to force Gazprom to negotiate with Ukraine.