10/4/2014: Game of Chicken: Ukraine-Debts-Russia-Gas-Europe...

What's the story about Ukraine's gas debts? Here are some facts as reported by the Russian Minister for Energy Aleksander Novak and Gasprom's Deputy Chairman of the Board Vitaliy Markelov yesterday, with data as of April 9:

• Total Ukrainian arrears on gas amount to USD2.238 bn which is approximately USD830 million above the levels at the end of December 2013. This relates to sales of gas prior to price increases.
• To cover winter demand, Ukraine needs reserves of 18 billion cubic meters of gas, with current shortfall at around 11.5 billion. Shortfall value at current prices is between USD4 and 5 billion, depending on timing of purchases.
• Contracts for gas deliveries include a clause allowing Russia to demand pre-payment for purchases. Prime Minister, Dmitriy Medvedev stated that Russian side now has full basis for switching to pre-payments system, as Ukraine failed to cover imports of gas for March. President Putin adopted a delay in triggering pre-payment conditions. In response, as reported by Minister for Foreign Affairs, Lavrov, Ukraine notified Russia that imports of Russian gas will be paid for on the basis of Ukrainian-own prices. In addition, Ukraine's Minister for Energy and Coal Industry, Yuri Prodan threatened to interrupt transit of Russian gas to European customers.
• According to Prime Minister Medvedev, total Ukraine's debt owed to Russia is at USD16.6 billion. This comprises: USD2.2 debt on gas imports, USD11.4 billion general debt and USD3 billion in 2013 euro bonds. Minister for Finance, Anton Siluyanov also reported that Ukraine requested from Russian Government to aid in purchasing another USD3 billion tranche of eurobonds.
• Russia also confirmed that there have been no interruptions in Russian imports from Ukraine and there are no arrears or late payments on shipments from Ukraine which amount to around USD15 billion.
• Russia agreed to a tri-party negotiations on gas exports to Ukraine and transit issues, including Ukraine, EU and Russia, but refused to allow the US to participate in negotiations directly.

So we are down to the 'Game of Chicken' and Russia is quite confident it can manage any head-on collision.