Deal change: Ukraine President Viktor Yushchenko
Ukraine looks to change gas deal
Ukraine’s president plans to propose changes to a natural-gas accord with Russia that the two nations’ premiers hammered out to end almost two weeks of supply disruption for the European Union.
The Ukrainian side will seek to start consultations with Russia “no later than in the summer,” Oleksander Shlapak, the first deputy chief of President Viktor Yushchenko’s staff, told reporters today in Kiev.
The country will honor the contract’s terms because legally it cannot withdraw, he said.
The agreement reached by Russian Prime Minister Vladimir Putin and Ukraine’s Yulia Timoshenko should be made less disadvantageous for Ukraine’s economy, Shlapak said.
The deal, criticised by Yushchenko’s staff, means Ukraine pays 20% less than European prices for gas this year, while Russia keeps last year’s transit fee, before a full change to market prices in 2010, said a Bloomberg report.
“I cannot call this contract anything but a capitulation,” Shlapak said.
Yushchenko has clashed with Timoshenko over economic policy and relations with Russia.
The 54-year-old former central banker fired Timoshenko after six months as prime minister in 2005 only to reinstall her two years and as many premiers later.
“The government will not allow revisions of the contract,” First Deputy Prime Minister Oleksander Turchynov told reporters in Kiev today.
Russian gas exporter Gazprom and Ukraine’s Naftogaz Ukrainy agreed 19 January that Ukraine will pay market prices for gas from Russia this year with a 20% discount, starting from $450 per 1000 cubic metres.
Russia’s transit fee paid to Ukraine for sending the fuel to Europe was unchanged from last year at $1.70 for 1000 cubic metres per 100 kilometres (62 miles).
The deal threatens Ukraine’s budget and Naftogaz’s finances, Shlapak said.
“We will either have to raise sharply the prices households pay for gas or to support financially Naftogaz, and there is no money in the state budget for this,” Shlapak said. Viktor Baloha, Yushchenko’s chief of staff, said that consumers would have to pay more than they expect from next month and Naftogaz’s finances may be hurt.
Naftogaz has “strengthened its positions” with the deal because Swiss-based gas trader RosUkrEnergo, half owned by Gazprom, was removed from the supply chain, said Turchynov.
“We have fully balanced gas supplies to our consumers in 2009,” he told reporters in the capital.
The contract gives Gazprom unit Gazprom Sbyt Ukraina the right to sell 10 billion cubic metres of gas to Ukrainian industry this year and 13 billion cubic metres a year from 2010, Shlapak said.
This means Gazprom gets half of Ukraine’s paying consumers, he said.
The government has turned to the International Monetary Fund for a loan of $16.5 billion to halt the national currency’s decline, stabilise the banking system and help pay debt to Gazprom.
Timoshenko called for an emergency session of parliament yesterday after Yushchenko resisted her attempt to secure the central bank head’s dismissal.
Before the gas dispute with Russia, when Gazprom cut supplies to Ukraine on 1 January for the second time in three years, 4.5% of those asked in an opinion poll said they would vote for Yushchenko if a presidential election were held the next day.
A total of 15.8% said they would vote for Timoshenko and 19.8% said they favored Viktor Yanukovych, the leader of the Party of Regions and another one-time premier under Yushchenko.
The president’s office is seeking a special meeting of Ukraine’s national security and defense council in one week to “analyse the contracts” signed with Gazprom and ways to “live in these conditions,” Shlapak said.
The government should report on plans to maintain the budget and Naftogaz’s finances, he said.