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Russia, Ukraine reach deal on natgas debt
Journal Staff Report

MOSCOW, Feb. 12 Russia and Ukraine on Tuesday reached a deal on gas debt payments, averting a major aggravation that could have disrupted natural gas supplies and potentially affected the European Union.

The deal, reached at a three-hour one-on-one meeting in Moscow between President Viktor Yushchenko and his Russian counterpart Vladimir Putin, ends a five-day standoff between the two countries.

Today we heard from our partners that the debt payments will start in the near future, Putin said at a joint press conference with Yushchenko. Tomorrow the deal will be put on paper. Gazprom is satisfied with proposals made by the Ukrainian partners.

The deal was reached hours before deadline set by Gazprom, the Russian gas monopoly, for cutting gas supplies to Ukraine by at least 25% amid disagreements on the debt payments.

Gazprom estimated that Ukraine had owed $1.5 billion for gas supplies between November 2007 and February 2008, but Ukraine disagreed over prices that Gazprom and two Gazprom-friendly gas traders had been seeking to charge.

The deal reached in Moscow supports Ukraines argument that gas supplies in November and December 2007 must be charged at prices effective in 2007, or $130 per 1,000 cubic meters.

All gas natural gas supplied in January will be charged at $179.5 per 1,000 cubic meters, the price that had been earlier agreed for 2008. Gazprom last week was demanding Ukraine to pay $314/1,000 cu m for at least some of the supplies in January.

We come out of the fact that the 2007 gas debt settlements must be carried out at the price that had been in effect in 2007, Yushchenko said. We have to pay that debt.

Speaking of the 2008 supplies, we agreed that the base price of $179.5 will be maintained, Yushchenko said.

The deal alleviated fears in the EU that the disagreement between Russia and Ukraine could lead to disruptions of gas supplies. Ukraine, due to its massive gas pipeline network, moves up to 80% of Russias Europe-bound gas.

Yushchenko and Putin also agreed in principle to reshape the gas supply sector by removing RosUkrEnergo and UkrGaz-Energo, the two controversial gas traders, and replacing them with new entities that will be created.

We have to get rid of intermediaries that could have a negative impact on our relations, Yushchenko said, adding that the talks were very productive.

I think that in the near future we will be witnessing that proposals about the new structure [gas trader] will materialize, Yushchenko said.

Gazprom and Naftogaz Ukrayiny, the national oil and gas company, were ordered to draft the proposals that would make gas supplies direct and more transparent, Yushchenko said. (tl/ez)

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