Russia considers discount on Ukraine gas price

The Russian energy minister has announced Moscow’s readiness to mull giving Ukraine a discount for gas supplies within their existing contract beginning from the second quarter of 2015.

“We, obviously, will look into the possibility of providing such a discount, depending on our budget and market environment,” Alexander Novak told Rossiya 24 TV channel during a Tuesday interview.

The comments come against the backdrop of talks between Kiev and Moscow over gas deliveries that have been affected by the crisis in Ukraine’s east, where pro-Russia forces and the Ukrainian government have been engaged in battle.

Moscow had earlier given its consent to providing a discount of USD 100 per 1,000 cubic meters of gas for Ukraine in the first quarter, with further supplies expected to be discussed later in March.

Novak (shown below) noted that Russia could provide Kiev with a fresh discount via decreasing an export duty on gas, noting, “In theory, there is such a possibility… it is a matter of separate agreements.”

Moscow would consider a change in contract prices for gas for Ukraine, the Russian energy minister added. The prices are revised regularly under a formula set in relation to the prices of crude oil and oil products with a lag of six to nine months.

“(Oil) prices have fallen and the period that will serve as a basis (for pricing) saw lower oil and oil product prices,” Novak said.

Half of the natural gas that the European Union obtains from Russia is delivered by pipelines through Ukraine. The Russian gas supply accounts for nearly a third of the EU’s demand.

Ukraine has been paying USD 329 per 1,000 cubic meters of Russian gas in the first quarter.