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Minister: Natgas price rise to be minimal
Journal Staff Report

KIEV, Sept. 26 - Ukraine expects prices of natural gas imports next year will not grow more than $15 per 1,000 cubic meters, Economy Minister Anatoliy Kinakh said Wednesday, citing the draft 2008 budget.

Ukraine expects to pay not more than $145 per 1,000 cubic meters for gas in 2008, up from $130/1,000 cu m in 2007, Kinakh said, citing the draft approved by the government.

The 2008 budget anticipates that gas price growth will be within the level of inflation, Kinakh said. In other words, the price is expected at $145/1,000 cu m at the Russian-Ukrainian border.

The comments come weeks after the office of President Viktor Yushchenko expressed concern over the issue.

The Yushchenko office was concerned that Russia had been delaying the agreement on the gas prices towards the end of the year, which was making Ukraine vulnerable to pressure.

Any standoff between Ukraine and Russia over natural gas prices and supply volumes could lead to disruptions of gas supplies from Russia to the European Union, similar to what happened in early 2006, analysts said.

Ukraine, one of the largest consumers of natural gas in Europe, needs 75 billion cubic meters of gas annually to run its economy. It produces 20 billion cu m/year domestically and imports the remaining 55 billion/year, mostly from the Central Asia and Russia.

Ukraine is also the key route for Russian natural gas supplies to the European Union, channeling up to 120 billion cu m/annually, or up to 70% of Russias Europe-bound shipments.

Ukraine and Russia were originally supposed to agree by the middle of August on gas prices to be charged in 2008, but Russia had decided to postpone the agreement to October or November.

That triggered speculations in Ukraine that Russia may make the final decision over the prices after seeing results of the September 30 snap election in Ukraine ad its affect on the government.

Recent opinion polls showed an alliance of pro-Western parties in Ukraine could outperform the pro-Russian Regions Party at the election, which would lead to a change of the government.

Communist Party leader Petro Symonenko, a member of the current pro-Russian government coalition, said earlier this month that Russia would punish the pro-Western government in Ukraine by increasing the gas price to $300/1,000 cu m.

Although Ukraine imports most of its gas from Central Asia, such as Turkmenistan, Uzbekistan and Kazakhstan, all this gas is channeled across Russia, making Russia the key intermediary affecting the gas price in Ukraine.

Turkmenistan now sells all its Ukraine-bound gas to Gazprom at $100/1,000 cu m at the border between Uzbekistan and Turkmenistan. Gazprom later resells the same gas to RosUkrEnergo, a trader in which it owns 50%, at $100.5/1,000 cu m.

RosUkrEnergo, the only supplier of gas to Ukraine, ships this gas for 2,000 km to the Ukrainian border and sells it to UkrGaz-Energo, a gas trader, for $130/1,000 cu m. (sb/ez)




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