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Regarding Ukrainian Energy Debt and Gas/Oil Flow
Topic Started: Nov 24 2014, 02:56 PM (74 Views)
Bobithy
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Great Leader of the Korean People
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Alexander Novak
Minister of Energy
Russian Federation



Esteemed members of the international community,

As recently announced, we have not been receiving payments on the large debt owed to Russia by the Ukraine for their oil and gas purchases. This debt is nearly 4,000,000,000 US Dollars and will only continue to grow unless payments are made, and if payments are made on the debt it would be clear to us that the Ukraine would be unable to fill their business contract with the Russian companies responsible, all of which are State-owned thus making this a problem for the Russian government, not just those companies. The United States recently stated that the Russian Federation was required to send at least 25% of Ukraine's needed gas per the Treaty of Minsk. That was clearly misread as the Treaty of Minsk clearly states that Russia must restart 25% initially. That we did, and we have been supplying needed gas since. However it is not within the treaty that we must maintain that flow, though we normally would have no intention of stopping it. But, with a unpaid and large debt, we must take this very seriously.

There have also been concerns about us cutting off gas during winter months which would not only damage the Ukraine and its people, but would cause serious issues in Bulgaria, Greece, Macedonia, Romania, Croatia and Turkey. Let me make clear that the Energy Ministry of the Russian Federation has heard these concerns and at this time I am announcing that the gas and oil, needed for the heating of homes, cooking, and vital services will not be cut off to the Ukraine or any other country through the winter months, and hopefully not at all if the European community can work with us to find an acceptable payment method and scheduled for the debt owed by the Ukraine. We understand that, due to its decisions to spend its small amount of remaining money elsewhere, that the Ukraine may lack the funds to cover the debt; and we are not against the European community should they so choose assist in paying this debt. But that is obviously between Europe and the Ukraine. We will, however, need the Ukraine and any others who wish it, to discuss with us here and come up with a real plan for the payment of this debt in a reasonable time.
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Litos
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Itō Hirobumi
Frank Walter-Steinmeier
Foreign Minister

Mr. Novak,

At the request of your government, here are the proceedings of the mediation between the Ukrainian and Russian governments over this issue.

Currently both sides agree to a $400 million a year payment of the primary debt over the course of ten years.

With a 17.5% interest rate over two years of unpaid loans, $1.36 billion will need to be delivered by the Ukrainian government and all partners in structuring this year.

Germany will be contacting its partners and Southern European and Balkan countries that could suffer total economic meltdown if a prolonged gas severing occurs for restructuring plans.

We thank the Russian and Ukrainian delegations for speedily making progress towards a resolution of this potential energy crisis. Billions of dollars of economic value could be saved.
Edited by Litos, Nov 24 2014, 04:22 PM.
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Bobithy
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Alexander Novak
Minister of Energy
Russian Federation



We must state two things: first, the 17.5% interest rate is not one imposed by Russia, but one that exists due to the shaky economic position of the Ukraine. The second is that with that interest rate, it means that interest payments alone will be 680 Million US dollars per year, not 400. If the Ukraine wishes to expedite the paying off of this debt they will need to make larger payments per year. However we understand the economic situation of the Ukrainian government at this time and hope that the European Community will assist in this. I reiterate that we will not be cutting gas or oil off for the winter months.
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KnightConcorde
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Yuriy Prodan
Minister of Energy [Generation] and Coal [Mining] Industry of the Republic of Ukraine


Minister Novak,

According to our own calculations, with the 17.5% interest rate on the payments, Ukraine would have to pay $470 million per year to Russia over a 10 year period, not $680 million per year as you have stated.
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Bobithy
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Alexander Novak
Minister of Energy
Russian Federation



With due respect Minister Prodan,

Your debt owed to the Russian Federation is nearly 4,000,000,000 US dollars, and will likely be more than that if the interest payments are not paid. 17.5% interest on the debt you owe comes to 680 Million USD's, which mean that yearly that is the needed payment to ensure the debt does not go up. If it is not paid, then the debt goes up. If you want to pay off the debt, then more than that is needed. That is simply business and loan management Sir, and we understand your country is in financial trouble. But that does not mean you can stop paying at least the interest payments on your debts. The interest payment is 680 Million per year, and if you want to begin paying off the debt as a whole than more money will be needed.

If you do not pay off the debt, then the interest adds to the debt and the interest payments go up as the debt goes up. But if you consistently pay off the interest per year, then the debt remains the same.
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KnightConcorde
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Bobithy
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Great Leader of the Korean People
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Litos
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Itō Hirobumi
Frank Walter-Steinmeier
Foreign Minister

Apologies, we mean the baseline payment reduced from the quantity of debt per year was $400 million, while the interest payment is $680 million.
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