Gas row: rumbles on
Kiev and Moscow keep talking
Russian and Ukrainian energy executives will try again today to clinch a deal on Kiev's gas debt that if not resolved, could see flows cut in the New Year, threatening the smooth transit onwards to Europe.
Talks over Ukraine's gas debts to Russia ran all day yesterday as Russia's gas monopoly Gazprom renewed threats to more than double gas prices to Kiev from 2009 and Prime Minister Vladimir Putin intervened in the highly politicised debate.
"They don't want to pay," Putin, who said he spoke on the telephone to Ukraine's President Viktor Yushchenko for "almost an hour," told reporters.
The two countries are locked in the fourth gas row in as many years over debts and prices for next year. Gazprom has said there was a 50 percent chance of cutting supplies from 1 January, if Ukraine fails to pay its debts.
Europe is closely watching the dispute. It gets a quarter of its gas from Russia, most of which is transported across Ukraine, and a supply cut in January 2006 after a similar row between Kiev and Moscow, briefly affected European consumers.
The dispute is being played out as the economies of both countries grapple with the effects of the global financial crisis. Ukraine's already ailing state energy company Naftogaz has to pay debts of over $2 billion, according to Gazprom.
Gazprom has already warned European customers it fears Ukraine could resume what it describes as siphoning gas from transit pipelines. Kiev says it will respect all obligations and has enough reserves in underground storage to withstand a cut.
Officials in both countries sounded more optimistic yesterday than last week and said they hoped Gazprom would not carry out its threat as Kiev appeared to have warmed to a non-cash solution to its debts proposed by Moscow, a Reuters report said.
"I am confident that there is a formula for a solution," Russia's First Deputy Foreign Minister Andrei Denisov was quoted by Interfax new agency as saying. "In the end, it may be found 15 minutes before the New Year."
Gazprom's export boss Alexander Medvedev said Gazprom still hoped to sign this year a gas supply deal with Ukraine for 2009 and Gazprom's executives said talks would continue today.
"We hope our proposals would be accepted and we will begin the new year with a new contract which will allow to soothe fears of population in Europe, Ukraine and Russia," he told state television Vesti 24.
Gazprom has said it wants Ukraine to fully pay the debt before 1 January but last week it said it would accept a deal that would outline clearly the debt redemption after that date.
Russia and Ukraine have yet to agree on the 2009 price of gas. Kiev pays $179.50 per 1000 cubic metres compared with $500 per Mcm in Europe, where gas and oil prices are set to decline.
Last night, when it became clear that no breakthrough was expected, Gazprom boss Alexei Miller issued a new warning to Ukraine saying it could see the price of gas more than doubling in 2009.
"In the case of switching to market, European prices, the price for Ukraine should amount to $418 per Mcm," he said in a statement. Ukraine wants to switch to market prices gradually, but in exchange Gazprom wants concessions from Kiev.
Kiev is studying a Gazprom idea to count the debt against future fees that Russia pays for gas transport to Europe, said Yushchenko's chief economic aide Oleksander Shlapak.
"A number of sources (from which to pay debt) is being looked at, including prepayment (for transit) for next year," Shlapak told a news conference.
"If they are really ready to give us credit, to pay for transit services, then they can set their terms," he said.
The European Union and the US have called on both sides to quickly reach a compromise. In 2006 several central and southern European states were affected by the supply cut.