* Current capacity for EU gas flows to Ukraine is around 5
* Slovakia could provide more gas to Ukraine but would take
* Regulatory hurdles have so far prevented more flows
(Adds details, comments, changes dateline and byline)
By Pavel Polityuk and Henning Gloystein
KIEV/LONDON, April 4 Ukraine is in emergency
talks with European Union neighbours on the possibility of
importing natural gas from the West, following a leap in the
price it pays for Russian supplies, Prime Minister Arseny
Yatseniuk said on Friday.
The urgency of securing affordable supplies has grown since
Moscow - which annexed Crimea from Ukraine last month - raised
its discounted gas tariff for Kiev twice this week, almost
doubling it in three days.
Yatseniuk told reporters that one possibility was "reverse
flows", in which EU countries would send gas back down pipelines
normally used in the transit of Russian supplies through
Ukraine to the West.
"We are carrying out emergency talks with our European
partners. One way to solve the problem is reverse gas from EU
countries," he said, adding that the main candidates for imports
were Slovakia, Hungary and Poland.
Ukraine, which is in an economic crisis, covers half its
needs with Russian gas. However, relations between the countries
became hostile after protesters ousted pro-Moscow president
Viktor Yanukovich in February and Russia seized Crimea, leading
to the worst East-West crisis since the Cold War.
Yatseniuk said it was possible to send gas down the
pipelines in the opposite direction to the normal east-west
flow. "On a technical level, the idea of reverse gas raises no
problems, and we hope our European partners make the right
decision. If it will be to reverse, then it means the price for
gas will be $150 dollars lower than Russian gas."
Russia has raised the price to $485 per 1,000 cubic metres,
meaning Gazprom, Russia's monopoly gas exporter,
charges Kiev about the same as other customers in central
Europe. Ukraine will soon get money from the International
Monetary Fund under a new loan package but faces large debts and
its economy is in chaos.
The discounted price had been part of Moscow's strategy of
keeping Ukraine, a fellow former Soviet republic, under its
political influence and discouraging Kiev from building closer
ties with the EU. Yanukovich's rejection of an EU trade and
cooperation deal set off the protests that brought him down.
Yatseniuk has called the price increases unacceptable and
warned that he also expects Moscow to increase pressure on Kiev
by limiting supplies. Russia has frequently used energy as a
political weapon in dealing with its neighbours, and European
customers are concerned it might again cut off deliveries.
"At this price for gas, Ukraine will most likely continue to
import and ratchet up its debt. It will happen until either side
decides to go to arbitration or Russia decides to cut off
deliveries of gas to Ukraine," said independent energy analyst
"If it goes to the court, we could expect a very long
ordeal, but if Gazprom cuts supplies, Ukraine will take gas from
volumes intended for European consumers," he said.
One source who advises on gas contracts noted that Russia
offered the discount in 2010 in return for continuing use of its
Black Sea naval base in the Crimean port of Sevastopol.
"With the seizure of Crimea, Moscow now could argue the
rebate is now longer valid, hence raising the gas tariff to
levels more normal in the region," said the source. "This is, I
would imagine, something Kiev may contest in arbitration as it
didn't hand over Crimea voluntarily."
LIMITED REVERSE CAPACITY
Russian gas meets around a third of EU demand. About 40
percent flows through Ukraine, with the rest sent to Germany via
the Nord Stream pipeline under the Baltic Sea or in the Yamal
Europe pipeline through Belarus and Poland.
Poland opened its first West-East gas link on Tuesday as
part of an EU drive to ensure greater supply.
Valery Nesterov of Moscow-based Sberbank CIB said reverse
gas flows could not go beyond 5 billion cubic metres (bcm) this
year, or only about 8 percent of Ukrainian demand.
Poland has a reverse capacity of 1.5 bcm to Ukraine, while
Hungary is able to send 3.5 bcm. Romania has the potential for
1.8 bcm, but there has been no firm agreement on its use.
Energy consultancy Wood Mackenzie said regulatory obstacles
also had to be overcome.
Ukraine's energy minister Yuri Prodan said Kiev wanted to
buy gas from neighbouring Slovakia, but the Slovak gas company
had declined to let Ukrainians examine its transit facilities.
Slovakia's Eustream, which operates the gas network, denied
this. "Eustream is prepared for cooperation with its Ukrainian
partners on reverse flows," a Eustream spokesman said. The
company added that "meetings scheduled for the next few days
should provide answers to questions of technical, financial and
Slovakia has the potential to reverse flow more than 20 bcm
into Ukraine, meeting over a third of the country's gas demand,
but not in a hurry. Analysts said it could take another six
months for gas to start flowing and the flow would be unlikely
flow to reach maximum reverse capacity.
(Additional reporting by Michael Kahn in Prague, Denis Pinchuk
in Moscow and Alexander Winning in London; Writing by Thomas
Grove; editing by David Stamp)