Ukrainian and Russian PMs disclose views on Russian gas price

Analyst: We do not see any prospects for Ukraine and Russia to agree on
solving their gas dispute.


KYIV, Sep 4, 2014 (UBO) - Ukraines Prime Minister Arseniy Yatsenyuk believes the
average price for Russian gas supplied to Ukraine should be about USD 340/tcm, Concorde
Capital told clients in an online advisory that continues below.

Yatsenyuk shared his calculations at a Sept. 3 presentation of the governments action plan
on renovating Ukraine. The legitimate gas price should be close to USD 385/tcm in the
high season and about USD 300/tcm in the low season, he said. He also declared that
Ukraine secured the possibility to import about 15 bcm of gas annually from EU countries
to partially substitute its import needs from Russia (Ukraines total 2013 gas imports were
28.0 bcm).

The day before, Ukraine started importing gas from Slovakia via a new connection of total
annual throughput capacity 9.9 bcm of gas. The price at which Ukraine buys gas from
Slovakia is below Gazproms offer of USD 385/tcm, according to Naftogaz CEO Andriy
Kobolev.

According to the presented governments action plan, Ukraine is also going to start
concluding gas transit agreements with EU-based gas traders and persuade them to shift
the point of purchase for Russian gas to the Russian-Ukrainian border, instead of the
Ukraine-EU border currently.

Russian PM Dmitry Medvedev responded the same day, stating that his side is ready to
discuss with Ukraine the possibility of seasonal prices for Russian gas, but in any case the
average gas price should be closer to USD 385/tcm, according to the Interfax news
agency. Medvedev also stressed that any cooperation with Ukraine in the gas sector is
possible only after repayment of existing debt for gas, which reached an astronomic
number. Depending on price assumptions, Russias total claim against Ukraine ranges
between USD 4.5 bln and USD 5.0 bln. Recall, Russia stopped supplying its gas to Ukraine
since June 16, as the two sides failed to reach any agreement on the price of gas and
terms of payment.

Concorde analyst Alexander Paraschiy added: Talks between the Ukrainian and Russian
sides on the gas issue, where the parties can exchange their ideas and reach some
agreement, are possible not earlier than next week. The sides, therefore, have enough
time not only to defend further their view on prices, but also change their view. We do not
see any prospects for Ukraine and Russia to agree on solving their gas dispute.

Thus far, the best and cheapest way for Ukraine to secure some supplies of Russian gas
at an affordable price is to persuade EU-based traders to buy Russian gas at the
Russia/Ukraine border. We expect all the efforts of the Ukrainian government will be
focused on these attempts.

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