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EU and US energy summit to discuss Ukraine's gas woes

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(BRUSSELS) - The European Union and the United States meet on April 2 to discuss energy cooperation, notably how to help Ukraine meet its energy needs and repay its sizeable gas debt with Russia.

US Secretary of State John Kerry and the EU's foreign policy chief Catherine Ashton will attend the talks, which will come under the framework of the EU-US Energy Council, established in 2009 to foster transatlantic cooperation in the energy industry.

A source close to the talks said the situation in Ukraine was "a big thorn in the side" for the EU and the US, with concerns that the troubled eastern European country was now dipping into its reserves.

Ukraine consumes 50 billion cubic metres of natural gas a year, of which 20 billion cubic metres are produced locally with the remainder imported from Russia.

And the country's gas pipelines carry almost half of the gas sold to the EU by Russia. The 28-nation bloc imports 27 percent of its gas from Russia.

Ukraine's gas reserves, estimated at 11.5 billion cubic metres at the beginning of March, are declining, with energy minister Yuri Prodan telling the EU's Energy Commissioner Gunther Oettinger earlier this month that Ukraine's reserves were down to 8.5 billion cubic metres.

Russia's state-controlled gas company Gazprom has threatened to stop selling gas to Ukraine because of $1.9 billion (1.3 billion euros) in unpaid bills; Gazprom has also announced that Kiev's preferential gas prices will end on April 1.

"We will pay a price of $387 per 1,000 cubic metres," Prodan said, a huge increase from the $270 per 1,000 cubic metres Ukraine pays today.

The EU and US face energy challenges on a number of fronts: they must help Ukraine pay its gas debts with Gazprom and to buy as much gas as possible before prices go up in April, while preparing a contingency plan in case Russia cuts gas supplies.

The EU has committed 1.6 billion euros of assistance to Ukraine, with the US and Japan both also earmarking 1 billion euros.

The EU has also vowed to help Ukraine with gas supplies if supplies from Russia were interrupted. It could do that by reversing the flow of gas in a number of pipelines.

Oettinger said 2 billion cubic metres of gas could be sent to Ukraine through pipelines in Poland and Hungary.

Pipelines from Slovakia could add between 3 and 8 billion cubic metres by the end of the year, he added.

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