Kuchma and Putin meet in Sochi, discuss provision of natural gas (10/22/00)

Kuchma and Putin meet in Sochi, discuss provision of natural gas

by Roman Woronowycz
Kyiv Press Bureau

KYIV - President Leonid Kuchma has agreed to allow Russia to take part in the privatization of Ukraine's natural gas pipeline after meeting with his Russian counterpart, Vladimir Putin, in Sochi, Russia, on October 16.

The agreement was one of several deals signed by the Ukrainian president during separate trips to Russia and Uzbekistan between October 12 and16 to resolve energy deficiency problems in Ukraine that some experts here say may lead to unheated buildings this winter.

Energy issues have absorbed much of the Ukrainian government's attention for the last few months as business oligarchs and leading lawmakers have struggled with the government of Prime Minister Viktor Yuschenko and his energy chief, Vice Prime Minister Yulia Tymoshenko, over energy sector reforms. The oligarchs have said that Ms. Tymoshenko's policies will lead to a severe natural gas shortage in Ukraine this winter.

During their one-day meeting in Sochi, the Ukrainian and Russian presidents seemed to resolve one of the major problems confronting Ukraine in its efforts to guarantee sufficient natural gas resources. They agreed that Russia would invest in upgrading Ukraine's aging natural gas pipeline, which would indicate the suspension of Russian plans for an alternative gas transit route around Ukraine, in return for Russian involvement in the privatization of the Ukrainian natural gas transit system.

Mr. Putin said he was satisfied with the deal. "This is a good offer, and we accept it," said the Russian president, according to Interfax-Ukraine.

President Kuchma's spokesman, Oleksander Martynenko, agreed and explained that, by including the Russians in upgrading the transit system, it would make the Moscow effort to develop a second pipeline through Belarus and Poland, to bypass Ukraine, redundant. While downplaying continued severe Russian criticism of the siphoning off of millions of cubic meters of Russian gas by public and private corporations in Ukraine as it passes through the territory on its way to Western Europe, Mr. Martynenko said an upgraded pipeline would give Russia the extra capacity it is seeking as it works to increase its exports to the West.

Several days later, however, the fickleness of Russian/Ukraine natural gas and oil trade relations were underscored, when the Petroleum Information Agency announced on October 16 that a five-company consortium had been organized for developing a gas pipeline from Russia via Poland and Slovakia. The companies involved are Gazprom of Russia, Italian SNAM of Italy, the French Gaz de France and Germany's Wintershall and Ruhrgas.

Then, on October 18, Interfax carried an unconfirmed report, citing a source close to the negotiations, that an agreement had been signed in Moscow to build a pipeline bypassing Ukraine.

President Kuchma, commenting on the announcement, told Interfax on August 19 that Ukraine would not take countermeasures in connection with the creation of the consortium. He added that he did not consider the decision, taken after Russian President Putin had ostensibly agreed to be a partner in the Ukrainian gas pipeline, an act of betrayal.

"It takes time to move from protocol to implementation," explained President Kuchma, who called the agreement achieved in Sochi "in the best interests of the two countries."

Ironically, Mr. Putin had explained at the conclusion of the Sochi talks that in his estimation the most critical issues in Ukraine-Russia relations had been resolved. The largest obstacle in those relations is the outstanding Ukrainian debt for Russian gas deliveries. The Russian president explained that the two sides had recognized that Ukraine is not able to pay the entire debt at present. Therefore, it would pay what it could in hard cash, with the balance becoming a part of the "national debt of Ukraine to the Russian Federation."

Mr. Putin also gave assurances that Russia would not impede the flow of gas from Turkmenistan to Ukraine. He said that Russia had "committed to allow the whole volume of Turkmen gas through to Ukraine." Ukraine recently signed a 10-year commitment with Turkmenistan for the purchase of its natural gas at prices lower than what Russia offers.

Three days earlier in Tashkent, Uzbekistan, natural gas also was the central topic of conversation between Mr. Kuchma and his Uzbek host, President Islam Karimov, who offered Ukraine a unique partnership in oil and natural gas development. He told President Kuchma that Uzbekistan is ready to extend to Ukraine concessions for the prospecting and development of oil and natural gas deposits in the Central Asian country, in which Ukrainian investments would drive the development in return for 50 percent of the extracted energy supplies.

"Ukraine could use such a chance," said Mr. Karimov, according to Interfax-Ukraine.

The two presidents also spoke out for the formalization of organizational structures within the economic cooperation association GUUAM, members of which are Georgia, Ukraine, Uzbekistan, Armenia and Moldova. A joint statement issued by the two presidents underscored the association's readiness to enter "a new phase of development, whose essence is a deepening of economic cooperation" - in particular, acceleration of efforts to create a free-trade regime within the framework.

Presidents Kuchma and Karimov also continued to promote the need for a transport and communications corridor from Central Asia through Ukraine to Western Europe, which both presidents agreed is essential for the transit of energy sources.

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