Ukraine and Russia fail to reach deal in gas talks

Talks have stalled at the summit between energy officials from Ukraine and Russia hosted by the European Commission in Brussels yesterday. A breakthrough had occurred at 3 am on Tuesday, which was the deadline that Kiev had been set by officials of Gazprom and Moscow. Russia has threatened Ukraine if it defaults on its debt of cutting off all gas supplies flowing through the country, which comprises almost a third of the total gas supply for the EU at large, hence the larger concern. The feud has been long-running, but recently restarted in the wake of popular protests that toppled the former President Victor Yanukovych and Gazprom decided to scrap Ukraine’s previous discounts and raise its gas price 80% from $268.50 to $485.50 per 1,000 cubic meters. Gazprom has continued billing the Ukrainian Naftogaz at that rate, citing a debt of about $4.46 billion in unpaid bills, while Kieve has staunchly refused to pay the markup until a lower price is agreed upon.

Tensions had apparently eased when Ukraine paid its first installment of $786 million to Gazprom on the 2nd of June, but that was only for the first payment. The three representatives attending the talks were Ukrainian energy minister Yuri Prodan, Russian energy minister Alexander Novak, and the EU’s energy commissioner Guenther Oettinger. However, a previous meeting in Berlin over the past week, between Gazprom CEO Alexei Miller and Ukrainian CEO of Naftogaz Andriy Kobolev, seem to have eased tensions somewhat. The two have been speculated to have come to some kind of associative agreement by news sources such as the WSJ, Bloomberg, and RT.

The gas talks will be indicative as well of new Ukrainian president Petro Poroshenko’s attitude towards Russia. Elected by a huge margin, it is as yet unclear what Poroshenko’s stance towards Russia will be. With numerous problems with unrest in Donetsk and Slovyansk, it is unclear how he will prioritize the two issues. With a further $1.454 of Ukraine’s undisputed gas debt unpaid, which does not include any of the additional funds from the price increase, Ukraine is currently courting loans from the EU in order to keep its treasury solvent.

News Briefs:

  • Iran has announced that it will forestall plans to construct oil refineries in Syria, Malaysia and Indonesia. Plans were announced as early as 2009 to build a refinery In war-torn Syria that could refine up to 140,000 barrels of crude oil per year. A similar project, in Malaysia, has been postponed, though the contracts governing the plants’ construction have not been cancelled, indicating that they may resume development in the future.
  • China has announced the first successful test of a high-speed railway that connects the western city of Lanzhou with Urumqui, the capital of the region. Though only currently connected to railways in the country’s west, the Chinese government plans to expand the rail network to allow for transport between Xinjiang and its largest cities. One such project aims to connect Urumqui with Beijing at speeds of up to 220 miles per hour (350km).
  • Kazakhstan’s North Caspian Operating Company (NCOC) has announced that it has entered into negotiations with U.S. oil giant ExxonMobil over the status of its Kashagan oil field. Kashagan, one of the largest known oil deposits in the world, has hit a number of snags during development, the latest of which derailed the project from its expected launch date of early 2014. Since then, the Kazakh government has looked for new backers for the project, and may have found one in ExxonMobil, though officials from the energy hegemon have not commented on the deal.
  • Russia is preparing to launch a satellite-tracking station in Norak, Tajikistan, reports Russia’s RIA Novosti. The announcement details the station’s first test, stating that it has been scheduled for mid-summer, and will allow for Russia to increase the range of its detection efforts, as well as allow for the detection of reconnaissance satellites at lower altitudes. Norak, in northeastern Tajikistan, is located more than 2,000 meters above sea level in the Sanglok Mountains, and is reputed for its clear night skies.

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