Kiev: Moscow using fuel as a ‘weapon’

Ukraine given June deadline to pay $1.6 billion in arrears

Reuters, AFP-JIJI

Ukrainian Prime Minister Arseniy Yatsenyuk urged Russia on Tuesday not to use natural gas as a “weapon” against his country, accusing Moscow of seizing tens of billions of dollars’ worth of its assets and energy resources in Crimea and vowing to take the dispute to court.

Russian energy giant Gazprom earlier demanded a $1.66 billion prepayment from Kiev for June gas deliveries, saying Ukraine had only half its requirements in storage to ensure a trouble-free winter.

As tensions mount with Russia over its supply of gas to and through Ukraine on to Europe, Yatsenyuk said Kiev wanted Moscow to settle their differences by basing the contract on “market conditions.”

“We are ready for a market-based approach and Russia is to stop using natural gas as another, or a new type of, Russian weapon,” Yatsenyuk told a news conference with European Commission President Jose Manuel Barroso in Brussels.

“If Russia rejects this, then we (will) bring Russia to court in Stockholm,” the Swedish capital where Russian gas giant Gazprom has taken Ukraine to the international arbitration court in previous disputes.

“If I am not mistaken, they have 20 days left. This is the final call to Russia to sit at the negotiating table and find the solution,” he said.

Ukraine wants to change the conditions of a 2009 contract that locked Kiev into buying a set volume of gas, whether it needs it or not, at $485 per 1,000 cu. meters — the highest price paid by any client in Europe.

Moscow dropped the price to $268.50 after then-President Viktor Yanukovych turned his back on a trade and association agreement with the European Union last year, but reinstated the original price after he was ousted in February.

Kiev has so far refused to pay the higher price, saying gas is being used as a political tool by Moscow to punish Ukraine’s new leaders for moving closer to the EU.

Flanked by European Commission head Jose Manuel Barroso after talks in Brussels, Yatsenyuk added that if Russia cut the price back to the fairer $268.50 then Ukraine “will urgently pay (its) gas bill arrears,” meeting a key Russian demand.

Gazprom said earlier Tuesday that Ukraine had until June 2 to pay $1.6 billion owing or Moscow would halt supplies.

In addition, from June 3, Gazprom will only supply gas which Ukraine has paid for up front.

But he repeated a threat to take Gazprom to an arbitration court in Stockholm if the two sides failed to agree on a price by May 28, and said he was making a “final call” to Russia to sit down and negotiate a solution to the gas dispute.

Yatsenyuk accused Russia of seizing Ukrainian property worth tens or even hundreds of billions of dollars, including Crimean gas company Chernomorneftegaz, when it annexed the region in March.

“They have stolen more than 2 billion cu. meters of Ukrainian natural gas. They’ve stolen our fields, they have stolen our companies, they have stolen our onshore and offshore drills. We will see Russia in court too,” he said.

Meanwhile, the Ukrainian military suffered one of its bloodiest single days Tuesday since the separatist insurrection in the east began.

Kiev said seven soldiers were killed in an ambush by pro-Russian rebels armed with heavy weapons between the insurgent strongholds of Slavyansk and nearby Kramatorsk, bringing to 16 the number killed since mid-April.

The crisis has plunged the West’s relations with Russia to their lowest point since the Cold War and raised European concerns about the vital supply of Russian gas to the continent.

In April, Russian President Vladimir Putin sent a letter to the top 18 European countries warning them that gas supplies could be interrupted and urging them to help pay Ukraine’s debts.

The EU depends on Russia for a quarter of its gas supplies, with about half of that amount transiting Ukraine.

EU foreign ministers on Monday imposed sanctions on two companies that they said had been taken over in the Ukraine.

Barroso warned that it was not in Russia’s long-term interest to continue its current policy toward Ukraine, given it has its own internal problems of stability.

“It is not good for the future of Russia to have this kind of confrontation with the EU,” a major trading and investment partner, he said.

“If Russia continues with this kind of behavior it will only contribute to its further isolation in the world,” he warned.