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Beginning of Working Meeting with Deputy Prime Minister Igor Sechin

June 3, 2009

Gorki, Moscow Region

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PRESIDENT OF RUSSIA DMITRY MEDVEDEV: Mr Sechin, we discussed the issue of energy security at the Russia-EU summit [in Khabarovsk]. In the context of the new legal framework concept, which Russia has proposed and which I spoke about before, and given the current situation with payments for Russian gas supplies to Europe via Ukraine, I asked our partners to consider within the possibilities available to the European Union, European financial institutions and, perhaps, with involvement of the International Monetary Fund [IMF] the different options to finance these supplies, as well as the payments that Ukraine must make for the transit of Russian gas.

I know that talks of this nature were also held with European Union representatives at a Cabinet level. Since this situation is not simple, since there are some doubts regarding our partners paying capacity, and talks are being held with Gazprom, I would like to hear about what has ultimately been done, and whether there has been any response from potential participants in this process. Our position has been straight-forward from the beginning: not only are we ready to solicit such pooling of money, but we are also ready to take part in the syndication or money pooling to finance gas supplies, and consequently, to finance Ukraines payments, in order to help our partners. Nevertheless, as far as I understand, the situation at present remains complicated, and this issue has yet to be resolved.

Please brief me about the actions taken regarding this issue.

DEPUTY PRIME MINISTER IGOR SECHIN: Indeed, in developing on the discussion that began in Khabarovsk between yourself and our European Union partners, we have started monitoring Russian gas transit to Europe. This monitoring, conducted by experts, has shown that unfortunately, Ukraine has not begun to fill its underground gas storage [UGS] facilities. This, in turn, may create problems for gas transit in the winter. The Ukrainian government and Naftogaz of Ukraine have asked the Russian Government to provide a 4.2 billion dollar loan to buy about 19.5 billion cubic meters of gas for this very purpose.

In addition, I must report that presently, Gazprom has already pre-paid 2.15 billion dollars for the transit of gas through Ukraine. This amount is enough to ensure gas transit to Europe until the end of February 2010. However, the Ukrainian President has publicly stated that it is unacceptable to pre-pay any future gas transits. In addition, further uncertainty was created when the Ukraine-EU natural gas pipeline declaration was signed, creating a high level of risk for Gazprom, since it provides for changing the system of payments for gas transit. The declaration stipulates changing the system of managing Ukraines gas transportation system. In this situation Gazprom will clearly be unable to unilaterally finance its Ukrainian partners for these purposes.

Since you discussed this in Khabarovsk, we suggested that the European side give some thought to creating an international pool of lenders for Ukraine to achieve these goals. If the European financial institutions decide that this kind of work is possible, then the Russian Federation will consider how much it can contribute, as well.

DMITRY MEDVEDEV: And if they decide that it is not possible?

IGOR SECHIN: In any event, we are in contact with the Ukrainian side. Last week, I met with the Ukrainian Energy Minister [Yuriy] Prodan, and there are on-going consultations with Ukraine both at the level of prime ministers and with our colleagues, our partners. Yesterday, the head of Naftogaz [of Ukraine] [Oleh] Dubina was in Moscow where he met with Gazprom management. So we are searching for a solution. But clearly, this solution should not be one that is ineffective for Gazprom or unacceptable for us.

In this regard, the initiatives you outlined for our European partners on ensuring energy security are particularly relevant. We are promoting these initiatives among our contacts. The problem of Russian gas transit to the European Union is becoming increasingly urgent.  Thus, the Government has turned to the European Commission, to Mr Barroso, to the president of the European Union (currently the President of the Czech Republic), to the Swedish prime minister (as you know, Sweden will be taking over the European Union presidency in June), and to Ukrainian Prime Minister Yulia Tymoshenko, in hopes of synchronising these efforts.

We have been receiving signals from our European partners indicating that they understand the urgency of this problem, and we are in constant contact with the European Commission and [EU Energy Commissioner] Mr Andris Piebalgs. We have just received word that Italy supports our initiative. The Italians would like to look into this issue at the next Russia-EU summit. We hope that in the time remaining, we will be able to find a solution to this issue.

DMITRY MEDVEDEV: We must maintain contacts with our European partners and with Brussels, along with countries presiding over the EU and with our Ukrainian colleagues. But at the same time, we must keep in mind that this issue is not just a problem for Russia and Ukraine, as some people occasionally try to paint it. This is a problem of supplying gas to other countries European countries so it is false to say that it affects Ukraine and Russia alone.

And another thing: this is not Russias problem; it is Ukraines problem. Ukraine must make payments in accordance with the agreement that was signed. Whether or not our colleagues like this agreement is of no importance to us. They signed it, and they must abide by it. If this agreement is not abided by, we will be forced to impose sanctions whereby all future gas supplies would need to be 100 percent pre-paid. This is not some kind of joke; it is normal business practice. It is a normal approach to relations between two companies, and should be the basis for our approach as well. At the same time, though, the Russian [Federation] Government, and you, as the Deputy Prime Minister in charge of energy, must make all the necessary efforts to minimise the negative effects and, when possible, help Ukraine as a nation that is going through significant financial hardship. Still, we must not do all this alone.

At the G20 summit [in London], we created an enormous [rescue] fund [for the global economy] pledging 1.1 trillion dollars. Russia has just made the decision to invest a significant amount in International Monetary Fund bonds. Let this money be used, among other things, to help the economies that are facing difficult times, economies that have historically close ties with our economies, and which are indeed struggling. I think that we should keep this in mind during our talks with Ukraine and our EU partners.

IGOR SECHIN: Absolutely. We will step up our efforts in these very directions.



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