GazProm Halted Gas Supply to Ukraine Due to Non-Payment
Dec 02, 2015 09:52 AM EST
Alexei Miller, GazProm CEO said on Wednesday that the company has halted gas supply to Ukraine because of payment issue. This will be the new case of gas dispute between Ukraine and Russia that has been going for over two decades.
CNBC reported that Alexei Miller said GazProm sent the last shipment to Ukraine at 10 a.m. local time on Wednesday. GazProm will send no more gas because Ukraine has not paid in advance for future supplies. Previously, under an EU-brokered agreement, Russia resumed its gas shipment to Ukraine two months ago.
In the agreement, Ukraine paid GazProm $234 million of down payment from total $500 million. Russia also agreed to lower it gas price to the same level as the neighboring countries.
Russian and Ukraine has undergone dispute over gas for more than 20 years, and it posed a serious threat to European countries gas supply. The worst dispute occured in 2009, when Russia stopped its gas supply due to $2.4 billion debt Ukraine's Naftogaz owed to GazProm.
Russian and Ukraine gas dispute in 2009 generated energy crisis in European continent. It is because Russia used Ukrainian territory as pipeline transit for gas delivery to Europe. In order to solve the crisis, the IMF,World Bank and ERBD provided a $1.7 billion loan to Ukraine for reforming its gas sector and helping Ukraine to settle its debt to Russia.
As Business Insider reported, Europe relies heavily on gas pumped into the continent from Russia, much of which travels through Ukraine. Continuing gas dispute between both countries will start an energy crisis in Europe, especially Germany and Italy that are particulary heavy importers of Russian gas.
Ukrainian state-owned company Naftogaz is the appointed operator to distribute gas from Russia to European countries. However, the company has been named as source of problem in dispute between Russia and Ukraine.
One important point in the agreement between international financial institutions and Ukraine in 2009 is for Ukraine to reform its gas sector. That includes to reform Naftogaz. So far, Naftogaz has provided some efforts required by the agreement, but there are still shortcomings.
According to AFP, GazProm CEO Alexei Miller said that Naftogaz had used up all the gas it had paid for and "no new upfront payment has been made." Miller said "As such, deliveries have been stopped until the receipt of new payments from the Ukrainian company."
A long dispute between Russia and Ukraine over gas sector will need to be resolved soon, in order to secure gas supply to the European continent.