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Minister of Economics of Ukraine Arseny Yatsenyuk
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Feb. 09, 2006
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Ukraine Cuts off Gazprom Profits
// Friendship of the Nations
Ukraine found a way to reduce Gazprom's income on its domestic market. The Ukrainian government capped the price for gas sales to all categories of users at $110 per 1000 cu. m. for the next five years. This move makes the intention of Ukrgaz-Energo, the joint venture between Rosukrenergo and Naftogaz Ukrainy, to sell natural gas at $115 per 1000 cu. m. impossible. Now Gazprom will have to reach an agreement with Turkmenistan to hold the price of its gas down to keep the joint venture in the black.
Ukrainian Minister of the Economy Arseny Yatsenyuk stated yesterday in Kiev that The government of Ukraine, using its constitutional authority to determine pricing policy, passed a resolution setting the upper limit of prices for natural gas for all categories of users until December 31, 2010, at a level not higher than $110 per 1000 cu. m. before transit costs and VAT. The final price for industry will be $138. That price will be applied retrospectively to the beginning of this year.

Now the price of 1000 cu. m. of gas to the public is $18.25 (without VAT and transport costs), for budget-supported organizations and housing $35.25 and for industrial consumers $83.58. Of the 76 billion cu. m. of natural gas consumed in Ukraine last year, 34 billion went to industry, 30 billion was sold to the public and 12 billion was used in housing.

The final decision to set a price cap will be made by the Ukrainian National Commission for the Regulation of Electrical Energy. The government has prepared an explanatory text motivating its $110 price level. Rosukrenergo sell gas to Ukrgaz-Energo for $95, expenses are $5 and Ukrgaz-Energo makes a $10 profit. The recent announcement by Gazprom that gas prices may change due to higher purchase prices in Turkmenistan is no longer a concern for Ukraine, and has become the problem of the Russian monopolist. Sellers exceeding the set price can be fined and their profit confiscated into the federal budget. That will also be grounds for canceling their state registration, added Yatsenyuk. Gazprom had no comment on the topic yesterday.
Natalia Grib

All the Article in Russian as of Feb. 09, 2006

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