Ukraine sends small prepayment for Russian gas

Russian Energy Minister Alexander Novak attends a news conference in Moscow, October 31, 2014. REUTERS/Tatyana Makeyeva

By Pavel Polityuk and Olesya Astakhova KIEV/KRASNOYARSK, Russia (Reuters) - Ukraine has sent a small prepayment of $15 million to Russia for March natural gas deliveries, energy officials from the two sides said on Friday, after Moscow threatened to cut off supply. In their latest dispute, Ukraine and Russia have argued over who should pay for Russian gas sent to two rebel-held areas of eastern Ukraine after supply from Kiev was cut off. Moscow has also warned that Ukraine needs to prepay for future deliveries as a temporary deal for winter gas brokered by the European Commission ends next month. The European Commission has invited the Russian and Ukrainian energy ministers to talks in Brussels on Monday. This week, the Russian side appeared to offer a compromise as it promised to separate the payment issue from the dispute over the gas sent to eastern Ukraine. "Gazprom yesterday confirmed they would not count the gas supplied to Donetsk and Luhansk as covered by our prepayment and we immediately made a small advance for March calm the nerves of our European colleagues," Andriy Kobolev, CEO of Ukrainian state gas company Naftogaz, told reporters. The $15 million is enough to cover up to two days' supply. RISK TO EUROPE Russian gas exporter Gazprom has warned there are risks to gas for Europe that is piped across Ukraine if Kiev does not pay its bills. Naftogaz's Kobolev refuted the warning. "It is Gazprom's fiction. Last year we lived five months without Russian gas and provided transit very comfortably," he said. Moscow cut off supplies to Kiev last June and restored them in December in a dispute over pricing and unpaid bills that marked the third such clash in a decade. Naftogaz expects around 120 million cubic meters (mcm) of prepaid gas from Russia by the end of February and will gradually pay more to "maintain a certain prepaid amount to use as needed", Kobolev said. Gazprom said gas supplies to Ukraine were expected to reach 68.9 mcm per day on Friday. Kobolev said Ukraine faced no pressing deadline in the mooted talks with Russia over future gas deliveries. "The negotiations this year will be easier for Ukraine in terms of the business environment, but it is much harder in terms of policy," he said. Naftogaz spent $830 million on 2.39 billion cubic meters of Russian gas over the three peak winter months. That works out to around 26 mcm per day, less than the amount Ukraine produces itself and less than it receives in reverse flows from Europe, supplies which Kiev plans to increase in March. Kobolev said he expected Naftogaz to increase imports from Slovakia to 45 mcm per day from 41 mcm and raise imports from Hungary to 14 mcm from 5.8 mcm. Supplies from Poland are likely to be stable at 4 mcm per day, he said. (Additional reporting by Alexander Winning; writing Katya Golubkova, Editing by Elizabeth Piper and Jason Neely)