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Russia to alleviate Ukraine gas shortage
Journal Staff Report

KIEV, Sept. 7 – Russia indicated Thursday it would supply extra natural gas to Ukraine this year to prevent looming gas shortages, but the parties failed to agree on prices to be charged in October.

The emerging dispute on prices comes as Russia has been apparently seeking concessions from Ukraine in the energy sector, perhaps such as getting access to managing strategic natural gas pipelines.

Energy and Fuel Minister Yuriy Boyko met Alexei Miller, the CEO of Gazprom, Russia’s state-controlled gas monopoly Thursday, seeking to secure extra gas supplies this year at affordable prices.

The talks over gas supply volumes and prices are extremely important for sustaining Ukraine’s economic growth this year and next and are the government’s top priority.

Ukraine has been facing the shortage of up to 8 billion cubic meters of gas this year, or more than 10% of the country’s annual demand, and has been planning to import the gas from Turkmenistan.

However, these plans appeared to be undermined earlier this week, after Gazprom has agreed to purchase most of available natural gas from Turkmenistan this year and through the end of 2009.

The Russian-Turkmen gas deal left Ukraine little choice but to conduct talks with Gazprom over extra gas purchases this year in order to bridge the supply gap.

Gazprom apparently agreed to buy extra 12 billion cu m of gas from Turkmenistan in the fourth quarter, of which 8 billion cu m may be supplied to Ukraine, at $100 per 1,000 cu m at the border between Turkmenistan and Uzbekistan.

The price suggests that Ukraine would have to pay at least $135/1,000 cu m at the birder between Ukraine and Russia for extra gas supplies as soon as in October, analysts said.

Prime Minister Viktor Yanukovych and other officials have been persistently suggesting that Ukraine’s gas prices will not change through the end of the year, but the talks with Gazprom indicate the dispute continues.

Following the talks between Boyko and Miller, Gazprom issued a statement suggesting that Russia will deliver the extra gas supplies, but the price will be agreed later and may be based on political considerations.

“The price of additional gas supplies this year will be fixed in a constructive way with due consideration of strategic prospects of cooperation in Ukraine’s gas sector,” Gazprom said in a statement.

The statement’s wording suggests that Russia will probably seek to gain control over Ukraine’s natural gas pipelines in exchange for keeping the prices at the current level of $95/1,000 cu m, analysts said.

Ukrainian officials, including Yanukovych, have persistently rejected the idea of letting Gazprom manage Ukraine’s gas pipelines amid concerns that this would undermine energy security. (nr/ez)




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