Russian natural gas giant Gazprom says that it won't discuss energy supplies to Ukraine until Kiev pays its massive debts to Gazprom for outstanding gas deliveries. Ukraine owes Gazprom an estimated $5 billion in back payments, and the energy giant has had enough. The debt is major leverage in the negotiations over the price of future shipments, and the threat of cutting off Ukraine would leave thousands without gas.
In 2009, Ukraine negotiated a contract to lock in prices at $485 per 1,000 cubic meters. After that deal was signed, former president Viktor Yanukovych had secured a price reduction to $268.50 per 1,000 cubic meters. However, when he was ousted from office and the interim government took power, that discount went with him, and prices increased back to $485. The Ukrainian government has refused to pay this politically influenced, inflated price, leading to the massive unpaid debt.
Russia's deputy energy minister Anatoly Yanovsky say today, "We want contract liabilities to be fulfilled... To continue talks, the debt should be paid." Yanovsky said Gazprom will send a bill before May 16th. If the bill is not paid, Gazprom would cut off gas in June. Putin did warn European leaders that this could occur last month, and Gazprom is making good on this warning.
This article is from the archive of our partner The Wire.