ATHENS/KIEV
Europe issued fresh calls on Saturday for dialogue with Russia over Ukraine, warning Moscow it faces having a failed state in its backyard just as it tightens the economic noose on Kiev.
Russia needs to understand it is not in its interest “to have a collapsing state in its neighborhood”, German Foreign Minister Frank-Walter Steinmeier said at the close of two-day talks with his 27 European Union counterparts.
As the Ukraine-Russia dispute over gas prices intensified, Germany’s Steinmeier stressed that Europe needed Russia to help rescue the new authorities in economically distressed Kiev.
“The issue of economic stabilisation also depends on how Russia for example, sets his energy prices for Ukraine. That’s why we, even if there is conflict between us, have to talk with Russia.”
Ministers emerged with a double-edged message from the informal talks, a regular six-monthly affair.
They laid heavy stress on defusing tension, on “trying to persuade Russia of the importance to de-escalate to ensure future dialogue”, said EU Foreign Policy Chief Catherine Ashton.
Europe must “keep open the channels of political and diplomatic dialogue with Russia,” said Greek Foreign Minister Evangelos Venizelos.
GAS PRICE STAND-OFF:
Ukraine has warned that it may be on the verge of its third natural gas price stand-off with Gazprom in eight years, raising the possibility that Russian supplies to European markets could once again be disrupted.
Addressing his cabinet on Saturday amid lingering fears that Russia could launch further military incursions after last month’s annexation of Crimea, the Ukraine’s prime minister said, “Russia has not managed to grab Ukraine through military aggression, so now they are pursuing a plan to pressure and grab Ukraine through gas and economic aggression.”
Arseniy Yatseniuk said Ukraine did not accept the price of $500 per 1,000 cubic metres that Russia this week set for its Ukraine-bound gas.
Russia in 2009 completely halted gas transit through Ukraine amid a price dispute causing serious disruptions in eastern European gas markets. During the first price dispute in 2006, Ukraine allegedly siphoned EU-bound gas for domestic needs after Russia sharply reduced transit flow.
Fears of supply disruptions after Russia took control of Crimea saw the price of UK natural gas, the benchmark European futures contract, leap to 61.7p a therm last month. However, the price has been in retreat ever since. The price of natural gas in Europe is at its lowest level since 2010 as warm weather and high storage levels curb demand for the fuel, but Russia supplies about 30 per cent of Europe’s natural gas, with almost half of it piped through Ukraine.
Warning that the next step of Russia could be to restrict natural gas supplies, Yatseniuk urged his government and Western officials to prepare. He called upon the EU to pressure Slovakia’s gas transit pipeline operator into sanctioning so-called reverse gas transit flow schemes, allowing Ukraine which relies heavily on Russian fuel imports to diversify by importing European market gas.
Yatseniuk spoke minutes after the chairman of Gazprom piled further pressure upon his cash-strapped country by announcing that the Russian energy giant would seek $11.4 billion in reimbursement from Kiev for gas price discounts from prior years that were unilaterally cancelled this week.
Alexei Miller spoke after the Russian government’s decision this week to annul a 2010 agreement through which Kiev got a gas price reduction in return for prolonging Russia’s right to use a Crimean port as base for its Black Sea naval fleet.
Kiev is trying to make a $2.2 billion outstanding payment to Gazprom.
Yatseniuk said Ukraine would “make all payments for previous gas supplies”, but “political pressure will not pass”.
Yatseniuk said Ukraine could seek to defend its interests through arbitration if gas price talks with Russia failed. “If we don’t agree, there is a procedure foreseen in the agreements,” he said, “appealing to the Stockholm arbitrage.”
