MOSCOW: Russian state gas giant Gazprom is awaiting the formation of a Ukrainian government before starting talks with Kiev on extending a deal to transit Russian gas across Ukraine to Europe, a senior company official said on Tuesday.
More than a third of Russia's gas exports to the European Union cross Ukraine, providing Kiev with valuable income. The current deal between Moscow on gas supplies and transit expires after Dec. 31.
Europe, where Gazprom has a 36pc gas market share, is closely following talks between Moscow and Kiev. Some European countries, such as Bulgaria, are completely dependent on Russian gas to heat their homes in winter.
"We understand that there is quite a difficult political situation in Ukraine today. We understand that a new government should be appointed, changes in the parliament should take place," Svetlana Burmistrova, the head of Gazprom's exporting arm, Gazprom Export, told reporters.
"And probably, after that, we will return to the discussions. Because as of today, it's not a secret to anyone, we don't understand with whom to hold talks. Who are those people and organisations with whom to talk?"
President Volodymyr Zelenskiy said Ukraine would hold a snap parliamentary election on July 21.
IMPASSE
Talks about continuing the gas agreement or creating a new deal have reached an impasse over numerous issues.
One bone of contention is a legal dispute between Gazprom and Ukraine state energy firm Naftogaz that led to a Stockholm arbitration court ruling in February 2018 saying that each company must compensate the other.
Russia also wants to bypass Ukraine by installing gas pipelines via the Baltic and Black seas, Nord Stream-2 and TurkStream projects, as relations between the two ex-Soviet countries soured following Moscow's annexation of Crimea.
Russian President Vladimir Putin has said Moscow is ready to keep sending gas to Europe through Ukraine once the current deal expires if supplies are economically viable.
European countries led by Germany have voiced concerns that Ukraine could lose gas transit revenues.
German Chancellor Angela Merkel told a news conference with visiting Ukrainian President Volodymyr Zelenskiy on Tuesday that Putin was aware that the gas transit via Ukraine was essential.
"I have repeatedly said to the Russian president that for me the issue of Ukraine being a transit country for gas is essential, so very, very important and President Putin has always stressed to me that he understands that," Merkel said.
Gazprom's Burmistrova also repeated the company's forecast for record-high gas exports to Europe in 2019 in the range of 194-204 billion cubic metres, despite a downward trend this year. Exports reached 201.9 bcm last year.
The company said on Monday it had exported 87.8 billion cubic metres of gas to countries outside the former Soviet Union from Jan. 1 to June 15, 6.3pc less than the same period last year.
Burmistrova blamed the decline on warmer weather in Europe and an economic downturn in Turkey, a top consumer of Russian gas.
She also said U.S. liquefied natural gas was not currently replacing Russian gas on European markets.
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