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Dec. 15, 2005
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Gasprom Responds to Ukrainian Refusal
// Overnight, the natural gas price for Kiev went up by 1.5 times
Diplomacy
Ukraine yesterday rejected the ultimatum of Alexei Miller, head of Gasprom, to put Ukrainian transit pipelines under the management of a gas-transportation consortium, where 50 percent belong to the Russian gas monopolist. In response, Gasprom announced that Ukraine has lost its chance to buy Russian gas in 2006 for $160 per 1,000 of cubic meters. Now, the price will be $220-$230. Naftogas of Ukraine refused again and negotiations hit a dead end.
Yesterday, Deputy Chairman of Gasprom Alexander Medvedev (he replaced another Miller deputy Alexander Ryazanov in the negotiations with Ukraine) postponed his visit to China. And yesterday also, the press service of Gasprom quoted his extremely harsh statement: Ukraine just lost the time, when $160 per 1,000 of cubic meters could be considered as a market price (Gasprom for several months was offering Naftogas of Ukraine to buy Russian gas for this price in 2006 Kommersant). From now on, starting from 2006 the common price formula would be applied to Ukraine, which would depend first of all of market demand and real market prices for oil byproducts basket. On NTV television channel, Medvedev named new price for the gas for Ukraine, which was calculated by such formula -- $220-$230 per 1,000 cubic meters.

There were immediate partisans of such a price increase. For instance, the head of the Russian Union of Entrepreneurs Alexander Shokhin called the decision of Gasprom to increase the price for Ukraine as absolutely the correct one. Minister of Finance Alexei Kudrin expressed an opinion that the Ukrainian economy can afford to pay more than $50 (current price that Kiev pays for Russian gas - Kommersant). The period, when we were building our relationship with consideration of the economics forms of our neighbors, has passed. We have to think about revenue for our budget, he added.

Deputy Chairman of Naftogas of Ukraine Andrey Lopushansky (he was the negotiator from the Ukrainian side instead of the head of Naftogas Alxei Ivchenko) answered not less categorically that the company will not buy gas for the price offered by Medvedev. He called the Gasprom proposal to jointly manage gas transportation system of Ukraine unacceptable .

Lets remind that on Tuesday evening Alexei Miller said on the air of TV Channel Russia Today that compromise with Ukraine is possible only in case if Kiev will give the management of Ukrainian gas transportation system to the consortium, where 50 percent belongs to Gasprom. This issue cannot even be discussed. This is strategy of Ukraine, Lopushansky stated after yesterday conclusion of Ukrainian Security Council session. During this session it was decided to send all European countries that consume Russian gas a note with an explanation of the situation.

Ukrainian President Victor Yushenko was remaining calm in this situation and asked to hold off from political speculations on the gas subject. Well count the price and tariffs and well come out for realization of mutual economic interests. In a few weeks this issue would lose actuality, he explained yesterday to news agency Interfax.

Several Ukrainian politicians think that the issue of forming prices for gas from Russia is lying in the political sphere. Victor Yushenko several times was making statements, which demonstrated fast closing with the West, so, Kremlin just suggested him to switch to European prices for energy sources, Yuri Boiko, leader of Republican Party of Ukraine and ex-head of Naftogas.

Also, a Kommersant source closed to Gasprom, said that Vladimir Putin approved a return of the previous scheme of paying taxes in relationship with Ukraine. According to the source, in order to support the candidacy of Leonid Kuchma on presidential elections in Ukraine, Russia switched in external trade with the republic from the principle of paying additional taxes in the country of origin, to the principle of paying taxes in the country of destination. In that case, the taxes were going to the Ukrainian budget. The loss of Russia from switching tax principle with Ukraine is appraised at $1 billion.

Yesterday, Valery Yazev, State Dumas Chairman of the Energy, Transportation and Communication Committee, said that the lower chamber is initiating a special bill for changing the Russian tax system for this case.

Natalia Grib; Oleg Gavrish, Kiev

All the Article in Russian as of Dec. 15, 2005

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