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Viktor Yanukovich Reinterprets the Price of Russian Gas
In talks in Sochi, Russian Prime Minister Mikhail Fradkov and his Ukrainian counterpart Viktor Yanukovich fell back on old tactics during oil negotiations between Russia and Ukraine. Yanukovich, who had sought to bargain down the price of Russian oil, even if only by $1, is now offering to pay $110 per 1000 m3 instead of the current price of $95, and he is now being asked to consider a "gas transport consortium" between Ukraine and Russia. However, unlike in 2004, this time Prime Minister Yanukovich refused to discuss the idea.
Yanukovich discussed the question of gas on a trip to Russia during his previous term as prime minister, in 2002-2004, so it is not surprising that Mikhail Fradkov has begun negotiations in Sochi with talk of gas. But this time, the man before him was a different sort of prime minister. Although Yanukovich declared on the eve of the talks that he intend to win a price cut from Russia on the price of a Turkmen-Russian gas mixture supplied by RosUkrEnergo, even if only by $1, by the time the talks started he was already willing to pay more in 2007 than the current price of $95. As Viktor Chernomyrdin, Russia's ambassador to Ukraine, told Kommersant, at the beginning of the discussion Yanukovich immediately declared that Ukraine would be able to "stretch" to $110 per 1000 cubic meters.
The sober good sense of Yanukovich's move is easy to explain. According to Chernomyrdin, Ukraine has been obliged to make such an offer by the harshness of Turkmenistan's position: Turkmen president Saparmurat Niyazov has repeatedly declared that he is not prepared to sell gas to Ukraine for less than $100 per 1000 cubic meters. This makes it impossible for RosUkrEnergo to sell a mixture of Turkmen and Russian gas to Ukraine even for the current price of $95. It should be remembered that Russia's president Vladimir Putin discussed the price of gas during a telephone conversation with Niyazov last week. However, it is unknown whether the Kremlin succeeded in convincing Ashgabat of the necessity of lowering the price for Kiev or forestalled a possible alliance between Kiev and Ashgabat against Moscow: rumors about the latter have surfaced again this month. Of course, Yanukovich's requested price makes doing business in Ukraine practically unprofitable for RosUkrEnergo. In addition, according to Kommersant's sources, Yanukovich has also insisted on a guarantee of gas delivery to Ukraine not only from RosUkrEnergo, but also from Gazprom.
No one knows whether Ukraine's both old and new prime minister expected changes of key in the negotiations, but he would have had grounds to: he is acting amid completely new political realities. For example, although he declared a month ago that he intended to grant Russian the status of an official language in the Ukraine, yesterday during his meeting with Fradkov he got straight to the point: "at this stage, implementing that provision is not possible." However, Russia met him with an agenda that hardly differs from that of the talks in 2004.
As Russian Industry and Energy Minister Viktor Khristenko told Kommersant, inasmuch as Russia desires chiefly to ensure the stability of gas supplies to Ukraine, Ukrainians must be prepared to get on board with the fulfillment of an agreement concerning a gas transport consortium. In 2003-2004, the Russian side floated a proposal to hand over management of the entire Ukrainian pipeline network to a Russian-Ukrainian consortium. In Khristenko's opinion, since all of the procedures for the creation of a consortium have already been worked out, all that remains is to revive the scheme: a scheme that will guarantee the transit of Russian gas through Ukraine.
For his part, Fradkov assiduously attempted to escape any discussion of gas prices in concrete terms, preferring instead to concentrate on explaining the importance of airing Russia's grievances towards Ukraine. "Winter is approaching, and there are problems with the pumping of gas from underground reservoirs and with pricing for Central Asian gas," said Fradkov. "Several weeks remain for the resolution of questions concerning contracts for delivery volumes until the end of this year and for the next year."
The portion of the talks not focused on gas was a similar repetition of the 2004 agenda. The Russian prime minister offered to Yanukovich to "discuss" perspectives for Ukraine's entry into the European-Asian Energy Consortium and the customs union, though he remarked that "the partners are in no rush." Khristenko, meanwhile, cast doubt on the advisability of Ukraine independently joining the European energy system before the rest of the CIS and Russia itself.
Yanukovich had few answers that anyone at the talks would call new, but he also offered few repeats of his previous positions. For example, he was unwilling to discuss the gas transport consortium, though two years ago he had liked the idea. Ukraine is ready to enter the European-Asian Energy Consortium, but talks with Belarus and Kazakhstan still lie ahead. Ukraine has, however, agreed to pump gas faster into underground reservoirs.
Yanukovich will not be too hasty with gas prices, despite pressure from Russia. Although Russia and Ukraine, according to Fradkov, will try to reach an agreement "in the shortest possible time," Fradkov also wrapped up the talks with the hope that "the first meeting of a commission on economic collaboration and preparations for a meeting between the presidents" would take place by the end of October or the beginning of November. As before, Russia did not succeed in speeding up the process: gas prices for 2007 will evidently not be set much before the middle of autumn.
Peter Netreba
All the Article in Russian as of Aug. 17, 2006
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