Russian, Ukrainian leaders reach gas debt deal
Tue Feb 12, 2008 2:33pm EST
By Oleg Shchedrov and Dmitry Zhdannikov
MOSCOW (Reuters) - The presidents of Russia and Ukraine settled a row over gas debts in talks on Tuesday, minutes before a Moscow-imposed deadline for Kiev to pay up or face supply cuts, and agreed to axe intermediaries in gas trade.
The row between the two former Soviet states had sent jitters through customers in Europe, who feared it could escalate into a repeat of early 2006, when a pricing dispute between Moscow and Kiev disrupted shipments to EU countries.
"We have agreed that Ukraine will on Thursday start repaying the debt, amassed in November-December last year," Ukrainian President Viktor Yushchenko told a news conference.
"Gazprom is satisfied with proposals made by the Ukrainian side," President Vladimir Putin told the same news conference.
Russian gas export monopoly Gazprom, which provides a quarter of Europe's gas, had threatened to cut 25 percent of supplies to Ukraine at 1500 GMT if there was no deal on the debt, which Russia put at $1.5 billion. Kiev put the figure at just over $1 billion.
EU Energy Commissioner Andris Piebalgs welcomed the deal as the basis to resolve future disputes. Most Russian gas exports pass across Ukrainian territory but both countries have assured Europe that westward gas flows will not be interrupted.
Many analysts had predicted Russia and Ukraine would clinch the deal since Putin wanted to show support for Yushchenko at a time when he is locking horns with Ukraine's new prime minister, Yulia Tymoshenko, who is more openly critical of Moscow.
Both presidents looked exhausted and pale after talks that lasted for four hours.
Putin, concerned about Ukraine's ambitions to join NATO, warned Kiev that Russia could be forced to redirect its missiles towards its former Soviet neighbor if it joined the Western military alliance and deployed a U.S. missile defense shield.
INTERMEDIARIES AXED
Gazprom insisted the gas dispute with Ukraine was a purely commercial one over unpaid bills, but it is likely to revive criticism that Russia is using its energy clout to exert political pressure on its neighbors.
"We firmly believe those disputes are of a political nature, so it is not a surprise that they are solved by top level politicians," said Valery Nesterov from Troika Dialog brokerage.
The row blew up less than two months after Tymoshenko returned to the prime minister's job after winning an election, replacing Viktor Yanukovich, who had warmer relations with Moscow.
Tymoshenko, who clashed with Russia over gas during her earlier stint in office, has recently been blaming Russian-imposed gas middlemen for racking up the debt.
Putin and Yushchenko said they supported transparency in gas trade and Gazprom's chief Alexei Miller told reporters later all intermediaries would be removed and replaced by direct deals between Gazprom and Ukraine's state energy firm Naftogaz.
Gazprom will now export gas to Ukraine and sell it inside the country via two 50/50 ventures with Naftogaz.
The previous import schemes involved RosUkrEnergo, Gazprom's 50/50 venture with two Ukrainian businessman, and a 50/50 domestic sales venture between RosUkrEnergo and Naftogaz.
Nesterov said the move, although it may appear at first glance a big win for Kiev, was in fact increasing Gazprom's presence on the Ukrainian market to 50 percent from 25 percent and would bring other political benefits to Moscow.
Putin has named Gazprom Chairman Dmitry Medvedev his preferred successor in Russia's March 2 presidential election.
"Outgoing President Putin is simply leaving fewer problems to his successor, Medvedev," Nesterov said.
Yushchenko said Russia had pledged to stick to the agreed price of $179.5 per 1,000 cubic meters despite earlier demands to pay over $300 for supplies in January.
The gas Russia supplies to Ukraine is a mixture of fuel from Russian fields and cheaper Central Asian gas.
The markets in Moscow closed before the deal was announced. Shares of Gazprom, Russia's largest firm by market value, closed 3.6 percent up, in line with the broader market
(Writing by Dmitry Zhdannikov; editing by Anthony Barker)
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