* Deputy chairman sees no impact from Kiev proposal
* MUkraine wants Western companies to help upgrade pipeline
* Moscow temporarily cut supplies to Kiev over unpaid debts
(Adds Gazprom CEO quotes, background, EU trade pact)
By Denis Pinchuk and Vladimir Soldatkin
MOSCOW, June 27 Russia's Gazprom has
shrugged off a Ukrainian proposal to bring in Western companies
to invest in the natural gas pipeline which crosses the country,
saying other transit routes bypassing Ukraine still promised to
make the pipeline redundant.
Gazprom's comments came as Ukraine and Russia, at odds after
Russia annexed Ukraine's Crimea region in March, remained locked
in a multi-billion dollar dispute over unpaid gas bills.
The Ukraine idea on pipeline investment is part of a
response to Moscow's decision to temporarily cut gas supplies on
June 16, following Kiev's failure to pay some of its gas debts.
Ukraine wants to share necessary investment in the ageing
pipelines as it needs the transit fees it generates for its
strained budget. But Gazprom says it has alternatives that mean
it won't be dependent on the Ukraine link.
"It won't anyhow affect us. But let's not forget that its
(Ukraine pipeline's system) age is more than 35 years with no
needed investments done," Gazprom Deputy Chairman Alexander
Medvedev told reporters on Friday.
Future gas talks between Moscow and Kiev could also be
complicated after the EU signed a trade pact with Ukraine and
warned it could impose more sanctions on Russia.
A couple of years back Gazprom has wanted to get at least
partial control over Ukraine's gas pipeline to oversee its gas
flows to Europe, but failed to agree with Kiev. This time,
Russia was not invited by the pro-Western government to consider
joining a possible investment consortium.
Alexei Miller, Gazprom CEO, told a briefing on Friday the
company had no interest in the project.
Gazprom earlier said its gas flows to Europe via Ukraine
increased on Friday despite the standoff.
Gazprom had cut gas supplies to Ukraine in June after
several rounds of fruitless talks between Russia, Ukraine and
the European Commission. Russia subsequently said it would not
revise the price until Kiev pays $1.95 billion to cover part of
its debts, raising the possibility of gas flow cuts to Europe.
Miller told a briefing Gazprom had started pumping gas into
European storages, expecting to pump over 5 billion cubic
metres. Yet this would not be enough to cover a significant
spike in demand if there were stoppages.
Gazprom shipped 162 bcm to Europe last year.
TIME FOR TALKS
Russia used to ship around three-quarters of its gas exports
to Europe via Ukraine. But the proportion has declined after it
launched the Nord Stream pipeline, with an annual capacity of 55
bcm via the Baltic Sea directly to Germany in 2011.
Gazprom plans a further pipeline, South Stream, to ship gas
to Europe across the Black Sea in 2015, with a view to
increasing its annual capacity to 63 bcm by 2018-2019, despite
opposition from the EU, which is unhappy that the project would
not be open to other suppliers.
"After we build South Stream, taking into account Nord
Stream and other routes, there will be almost no need left to
use Ukraine's gas pipeline system," Medvedev said.
Unlike in previous gas pricing disputes, which led to cuts
in Russian gas supplies to Europe in the winters of 2006 and
2009, the latest row has flared up in summer, when gas demand is
at a seasonal low. Analysts say the talks may continue for a few
months before seasonal demand rises.
"Gazprom will stick to its position that Ukraine has to pay
the debt first. This is non-negotiable for the Russian company,"
Katja Yafimava, a senior research fellow at the Oxford Institute
for Energy Studies, said.
According to Ukrainian state energy firm Naftogaz, Ukraine
has stored 14 bcm of natural gas underground. It says its
consumption is less at the moment than it produces and receives
This year, Ukraine expects to get between 5 and 6 bcm from
Europe in so-called reverse flows. Both Gazprom and Naftogaz
have appealed to an international arbitration court to settle
Gazprom's Miller said Gazprom may cut gas supplies to
European companies which reverse gas to Ukraine.
Ukraine wants to return to a discount price of $268.5 per
1,000 cubic metres, almost doubled by Moscow when pro-Russian
Ukrainian President Viktor Yanukovich fled after street clashes.
Moscow is ready to offer a discount to $385 per 1,000 cubic
metres by scrapping export duty, compared with the $387 Gazprom
charged its European clients on average last year.
(Writing by Katya Golubkova; Editing by Jason Neely and David