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Kiev readying for resumption of gas talks with Russia

January 13, 2012, 14:58 UTC+3

The natural gas issue is again on the agenda of Russian-Ukrainian relations

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KIEV, January 13 (Itar-Tass) — The natural gas issue is again on the agenda of Russian-Ukrainian relations. Negotiations between Ukrainian Minister of Energy and Coal Industry Yuri Boiko and Gazprom CEO Alexei Miller are to be resumed Monday. The for Kiev the aim of the negotiations is the same - to reduce the price of Russian gas, which currently stands at 416 US dollars per 1,000 cubic metres with taking into account the 100-dollar “Kharkov” discount. “The negotiations will have to be started virtually from zero – both the Ukrainian and Russian parties admit that at this point they have reached an impasse,” the Segodnya (Today) newspaper writes on Friday.

According to the newspaper, “On December 20, Moscow offered us a discount in exchange for the sale of 100 percent of the gas transport system (GTS), from which Kiev refused and continued to insist on the establishment of a tripartite consortium in which 33 percent of the GTS is sold to Gazprom and another 33 percent – to the European consumer companies. However, Gazprom rejected this formula.

Ukraine’s positions at the negotiations “are not that weak, we have our trump cards,” says the newspaper. “Before New Year’s Eve, Boiko announced that at current prices we will be buying only 27 billion cubic metres of gas, instead of the 40 billion cubic metres minimum stipulated by the Timoshenko-Putin contract. Gazprom has already protested and demanded payment of the short rate. However, Moscow will most likely have to abandon the idea. According to the Segodnya newspaper, the position of the Ukrainian authorities is firm: they will not pay the short rate, and if the Russians do not like it, let them go to the Stockholm Arbitration Court.” “There they will say that they do not like the volumes purchased by Ukraine, and we will respond to that we do not like the price – as it is one of the highest in Europe, without the “Kharkov” discount. Apparently, we will buy less, even if Gazprom is against this, unless we agree on the price.”

According to the newspaper, Kiev intends to continue to cut purchases of Russian gas also in the following years. “The option of buying the Qatari and Azerbaijani liquefied natural gas at 180 US dollars in quantities of up to 15 billion cubic metres is currently being considered; it will be unloaded at a terminal in Italy and pumped through a pipe via Bulgaria and Romania. However, there is one problem – to this end it is necessary to make the Bulgarian, Romanian and Ukrainian pipes work in a reverse regime, the publication says. It cites an opinion of an expert who called this variant “technically very difficult.”

In December 2011, Russia’s Gazprom CEO Alexei Miller said Ukraine had put the value of its gas transportation system at 20 billion US dollars and requested a gas discount of 9 billion US dollars a year if Gazprom bought into the system.

The Ukrainian Foreign Ministry said the national gas transportation system should be corporatized but without “giving up national interests.”

There is no question of whether to create a gas transportation consortium or not, Foreign Ministry chief spokesman Oleg Voloshin said in late December 2011. “It must be created by all means. The only question is on what terms. As for the consortium, we want a trilateral consortium with the participation of European companies and with reliable guarantees that it will not turn into a mechanism for exerting political pressure on Ukraine,” Voloshin said. “We are prepared to make all economic concessions. This is a much more flexible thing. But political terms are a much less flexible thing. We cannot sacrifice fundamental things, primarily European integration. This is why our talks with Russia are so complex,” he said. “We will be looking for an acceptable formula. It’s a situation where anything can be regarded as the surrender of national interests, even the fact that the negotiations are conducted in Russian, for that matter,” the diplomat said. “Of course, our president and government are clearly aware of the red lines that must not be crossed, and mainly everything that can obstruct the signing of the association agreement and further integration with the EU,” Voloshin said.

Ukrainian President Viktor Yanukovich suggested creating a gas transportation system that would be controlled jointly by Ukraine, Russia and the European Union. “We do not accept it when gas storage facilities are opened in Serbia under the North and South Stream pipeline projects. Basically, this means that the gas transportation system is being devalued and we are facing the risk of losing the transit,” the president. He invited Russia and the EU to create a gas consortium “in order to have guarantees of gas transit” because the Ukrainian gas transportation system needs modernisation, the cost of which will have to be paid by Ukrainian citizens.” “This is an open-ended proposal. It’s not new. We made it back in 2003 but today it has become as relevant as never before,” Yanukovich said.

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