The Presidents Meet before the Shutoff
// Russian and Ukraine may make peace in the gas war
Ukrainian President Viktor Yushchenko begins his official visit to Russia today. He has to prevent Gazprom from turning off Ukraine's gas at 6:00 this evening and reach an agreement on a new procedure for natural gas deliveries. By holding these negotiations, Yushchenko is battling Ukrainian Prime Minister Yulia Timoshenko at the same time, who has long been threatening to eliminate the middleman between Russia and Ukraine, the RosUkrEnergo company. She did, however, unexpectedly agree to preserve the existing procedure yesterday.
Yushchenko's visit to Moscow will at least delay the turning off of the gas to Ukraine. Gazprom originally threatened to turn off Ukraine's gas on February 11 unless it provided a guarantee on the repayment of its $1.5-billion debt. That date was then revised to February 12 at 10:00 a.m. Plans were made a long time ago for Yushchenko's official visit to Moscow on that date. Yesterday evening, Gazprom rescheduled the carrying out of its threat to 6:00 p.m. today. The presidents of Russia and Ukraine have a five-hour chance to settle all the disputes. (Their meeting begins at 1:00.)
That delay came after Yushchenko called Gazprom CEO Alexey Miller. Viktor Baloga, head of the Ukrainian president's secretariat, said yesterday that “We discussed Russian side's arguments in detail. They cannot be ignored. At the same time, there are real possibilities for a quick resolution of the disputed issues. However, for the deal to be successful, the political element has to be completely excluded from it.” Baloga did not say what exactly the political element is.
Even without comment, it is obvious that it is the heightening political competition between Yushchenko and Timoshenko to reform the domestic market in Ukraine.
A major Timoshenko political promise in recent years has been to remove the RosUkrEnergo company (50 percent of which belongs to Gazprom, 45 percent to Ukrainian businessman Dmitry Firtash and 5 percent to Ivan Fursin) from Russian-Ukrainian natural gas relations.
Yushchenko said he supported the efforts of his Orange movement ally half a year ago. However, after she became prime minister and started to carry out her promises, the president and his circle rose to the defense of that company. He said that it was unimportant to him what trader will work within the system as long as Ukrainian consumer received cheap gas.
Gazprom's latest claims against Ukraine were made after the Timoshenko began decisive moves to eliminate middlemen in gas deliveries. First, the Ukrainian government limited the presence of Ukrgaz-Energo (a subsidiary of RosUkrEnergo and Naftogaz Ukrainy) on the country's domestic market. Then, on February 6, the cabinet completely reversed its 2006 resolution on the creation of Ukrgaz-Energo. Understanding that it may be left without money for the gas it sold in the last quarter of last year, Gazprom demanded payment of debts to it through February 11.
Yesterday, Timoshenko acknowledged for the first time that Naftogaz's debt to Ukrgaz-Energo was $462 million in December, $394 million in November and $216 million in October. Thus, Ukrainian authorities have guaranteed that the liquidation of the corporation would not affect accounts. In addition, it laid the blame for the existence of the debt on the Timoshenko's predecessor in the post of prime minister, Viktor Yanukovich. “The total debt of the Viktor Yanukovich government on January 1 was $1.072 billion. That is debt that was accumulated,” Timoshenko explained.
Thus Timoshenko's efforts to eliminate the middleman have run into double resistance – from Gazprom and from Yushchenko. Yesterday, the Ukrainian president urged Timoshenko, for the third time since Gazprom announced its latest gas war, to take the settlement of the problem “under personal control” and find a way to “guarantee the appropriate volumes, an acceptable price, a transparent procedure and the absence of any unpleasantness.”
Obviously understanding that the initiative was slipping from her hands and Yushchenko intended to prevent her from determining the future natural gas procedure, Timoshenko backpedaled yesterday. At a meeting with diplomats from European Union countries, she announced that she agreed to the presence of the Swiss company RosUkrEnergo on the Ukrainian market as an intermediary for the transitional period, until direct contracts could be signed with the Russian Federation on natural gas delivery, and she would be satisfied to eliminate another intermediary, Ukrgaz-Energo. “We propose to convert at least to only one intermediary, RosUkrEnergo as of March 1, 2008,” Timoshenko said, “to remove Ukrgaz-Energo, which doesn't do anything except shuffle papers, stamp them needlessly and take additional money from Ukraine.”
Yushchenko has to settle Ukraine's remaining debt to Gazprom during his visit to Moscow today. Yesterday, first deputy head of the Ukrainian presidential secretariat Alexander Shlapak stated that money would be allotted from the budget today for the payment of the debt. Shlapak mentioned that the 2008 state budget for Ukraine apportioned about $1 billion for the needs of Naftogaz Ukrainy. Today that company will receive about $400 million. Shlapak emphasized that Naftogaz Ukrainy will settle accounts with Ukrgaz-Energo only after both sides agree on the volume and price of gas delivered to Naftogaz in November and December of last year. Gazprom is demanding that last year's debt be paid at this year's prices.
Timoshenko also announced yesterday that her government will repay the debt only on the condition that RosUkrEnergo signs a document on the delivery of gas at the end of last year at 2007. “We are prepared to settle accounts with the Ukrgaz-Energo company, if it presents bills based on 2007 prices,” she said.
Ukrainian media reported yesterday evening that Gazprom and Naftogaz Ukrainy has already agreed to a monthly protocol for gas deliveries. However, Sergey Kupriyanov, deputy head of the Gazprom information policy department, denied that information in a conversation with Kommersant, saying that negotiations were not completed.
Thus, the gas conflict between Russia and Ukraine has again been transferred from the sphere of economics to that of politics, and today Putin and Yushchenko have to act as peacekeepers. It will be much for profitable for Russia to come to an agreement with the Ukrainian president, since then it will be easier for Gazprom to pressure Timoshenko. He is to come to Moscow on February 21. During her visit, Timoshenko plans to resolve the issue of direct gas deliveries for this year with Russian Prime Minister Viktor Zubkov.
Not long ago, Gazprom was insisting on $314.70 per 1000 cu. m. for direct delivery, and Naftogaz wanted it for $179.50 with any intermediary except RosUkrEnergo. Now positions seem to have softened. Obviously, the compromise may be in the setting of some interim price, such as $190 per 1000 cu. m. on average for 2008 and a reconsideration of the delivery procedure with a change in intermediary in 2009. It is notable that, until today, neither Putin nor Yushchenko had said a single word of criticism of RosUkrEnergo, which has a good chance of operating until 2009, unlike Ukrgaz-Energo. As one insider on the Ukrainian gas market told Kommersant, “work has been going on since the middle of January under the old procedure, calmly and unhurriedly.”
Natalia Grib, Mikhail Zygar, Vladimir Solovyev
All the Article in Russian as of Feb. 12, 2008
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