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Russia and Ukraine sign gas deal

Latest update : 2008-03-13

Russia and Ukraine's gas monopolies signed a deal Thursday, after two days of talks in Moscow, bringing to an end their dispute of the last several weeks.

MOSCOW, March 13 (Reuters) - Russia and Ukraine will remove
all middlemen in their gas trade, Russia's gas export monopoly
said on Thursday, ending years of opaque schemes which caused
tensions between the two neighbours and alarmed investors.

"There is no need for them now after we agreed to supply
some volumes to Ukraine's industrial consumers directly and
given the upcoming rise in the Central Asian gas price,"
Gazprom's spokesman Sergei Kupriyanov told Reuters.

The move is likely to be hailed by Ukraine's Prime Minister
Yulia Tymoshenko, who has demanded Moscow axe all intermediaries
saying their role was unclear and led only to gas price
increases for Ukraine.

Her tough stance and Ukraine's debt for previous supplies of
gas were the main reasons behind a new round of tensions between
Moscow and Kiev, which prompted Gazprom to briefly halve
supplies to Ukraine earlier this month.

Russia supplies a quarter of Europe's gas needs and most of
that passes through Ukrainian territory.

European governments are wary of a repeat of the disruptions
to Russian supplies to the continent in the winter of 2006 which
came after a similar row between Gazprom and Kiev.

This year, the two sides argued about Ukraine's debts of
between $600 million and $1.5 billion for supplies in 2007 and
2008. They were also at odds over the new contract for 2008 and
the role of middlemen.

A breakthrough seemed very close after Russian President
Vladimir Putin and Ukraine's leader Viktor Yushchenko met in
February and blessed a new deal between Gazprom and Ukraine's
state energy firm Naftogaz.

Under that deal Gazprom and Naftogaz had been due to set up
two joint ventures to sell gas to Ukraine and to consumers
inside the country, but Tymoshenko said the scheme was no
different from the current use of other middlemen.

In past years, Gazprom has been selling gas it imports from
Central Asia to RosUkrEnergo, an intermediary it co-owns with
two Ukrainian businessmen on a 50/50 basis.

RosUkrEnergo was them selling the gas to UkrGasEnergo, a
50/50 venture between RosUkrEnergo and Naftogaz, for re-sale in

Gazprom's minority shareholders have repeatedly criticised
the role of both RosUkrEnergo and UkrGasEnergo, saying it lacks

Kupriyanov said that under the new deal, reached by
Gazprom's chief executive Alexei Miller and Naftogaz's head Oleg
Dubyna on Thursday after two days of talks, there will be no
intermediaries at all, including joint ventures between state

"This is a scheme similar to those we use in European
countries, such as Italy for example," he said.

Gazprom said it will sell Ukraine 49.8 billion cubic metres
of the gas it imports from Central Asia in March-December at a
price of $179.5 per 1,000 cubic metres -- a level unchanged from
the earlier agreement.

Of these volumes, Gazprom will receive back at least 7.5 bcm
annually for direct sales to Ukraine's industrial consumers.

That is much less than Gazprom would have gained under the
scheme approved by Putin and Yushchenko.

Date created : 2008-03-13