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Lawmakers block Russia-Ukraine gas merger
Journal Staff Report

KIEV, Feb. 6 – Ukrainian lawmakers voted overwhelmingly on Tuesday to approve legislation that would prevent a potential merger of the country’s natural gas pipelines with gas producing assets in Russia.

The vote, approved by 430 lawmakers in the 450-seat Parliament, is a setback for Russia that has been seeking to get control over the pipelines it uses for exporting gas to Europe.

The bill was put on the vote after opposition lawmakers had blocked the session of Parliament for hours responding to reports that Russia and Ukraine had been making progress in talks on the merger.

“Today a historical law has been approved that defends political and energy sovereignty of Ukraine,” Yulia Tymoshenko, a former prime minister and the leader of the largest opposition group in Parliament, said.

The overwhelming vote shows the level of opposition in Ukraine to any plans to sell state-owned natural gas pipelines, often regarded as the country’s strategically important assets.

Ukraine moves about 120 billion cubic meters of Russian gas annually, which is up to 80% of Russia’s overall exports to Europe. Ukraine has been always using control over its pipelines as leverage in talks with Russia preventing any sharp increase in Russian gas prices.

The tactics usually paid off by allowing Ukrainian steel and chemical companies to buy gas that had been usually cheaper than anywhere else in Europe.

But the controversy started last week when Russian President Vladimir Putin had suddenly announced that Ukraine and Russia have been making progress in talks over the merger.

Ukrainian government officials have since then issued conflicting statements over the talks that range from confirmation to an outright denial of the plans to merge the gas transportation assets.

Ukraine’s pro-Russian Prime Minister Viktor Yanukovych said that Ukraine has been seeking to get a 50-50 ownership in the merged entity, while First Deputy Prime Minister Mykola Azarov said the joint control over the pipelines would allow Ukraine to buy cheaper gas in Russia.

However, Deputy Prime Minister for Energy Complex Andriy Kliuyev said Monday he backed plans to increase cooperation with Russia in the energy sector, but had ruled out any plans allowing transfer of control over the pipelines to Russia.

Ukraine’s pro-Western President Viktor Yushchenko said he wasn’t sure the merger would benefit Ukraine.

The bill preventing the merger was drafted by Tymoshenko. It complements an earlier law that lists the Ukrainian gas pipelines as assets that are not up for privatization.

However, the bill shuts loopholes that could be potentially used to transfer the assets as part of a merger, bankruptcy or any other transaction, thus making it legally impossible to change the ownership of the pipelines.

The approval of the bill has already led to an angry reaction from Russia.

“I would rather get worried about development of the [gas transportation] system of Ukraine, not about making it untouchable,” Viktor Khristenko, Russia’s industry and energy minister, said in an Interfax report.

“The [gas pipeline] assets are not a boon, they’re a burden for maintaining the assets,” Khristenko said. “I believe the idea of merging gas transporting and gas producing assets is absolutely good for Russia, for Ukraine, and for the West.” (tl/ez)

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