Prime ministers of Ukraine and Russia sign new gas agreement (12/10/00)

Prime ministers of Ukraine and Russia sign new gas agreement

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The prime ministers of Ukraine and Russia signed an agreement on December 7 on a new natural gas policy between the two countries, which they hope will resolve uncertainties and strained relations over Ukraine's debt and the supply of badly needed energy to the country.

The signing came less than a week after Ukraine's President Leonid Kuchma and Prime Minister Viktor Yuschenko had agreed in principle with their Russian counterparts during meetings of the leaders of the Commonwealth of Independent States in Miensk, Belarus, on the resolution of several outstanding problems in energy relations between Moscow and Kyiv. Those issues included diversion of Russian energy from a Ukrainian pipeline to Europe by private Ukrainian interests, Ukraine's repayment of its large energy debt to Russia, future Russian supply of natural gas to Ukraine, and Moscow's approval for the transfer of gas from Turkmenistan to Ukraine through Russian territory.

In Miensk, President Kuchma said during a press conference with Russian President Vladimir Putin that he is "99.9 percent satisfied" with the settlement proposed for the various problems in Ukraine-Russia energy relations, according to Interfax-Ukraine. In recent months the unresolved issues had caused strains in relations between the two countries.

Mr. Kuchma explained that the 30 billion cubic meters of natural gas that Russia has agreed to provide in the agreement assures Ukraine that 100 percent of its future requirements for natural gas will be fulfilled. He said the two sides also had agreed on a stand-by fund in the amount of 5 billion cubic meters of natural gas, which would be utilized in the event of unplanned hold-ups in the delivery of gas from Russia to Western Europe. He noted that Russia had also agreed to provide a seasonal credit for 2 billion cubic meters of natural gas.

Moscow gave assurances that it would allow free transit of 30 billion cubic meters of natural gas from Turkmenistan through its territory. Ukraine agreed to purchase the natural gas during a visit by President Kuchma to Ashgabat earlier this year.

The most irksome issue for Moscow, which seems to have been solved in Miensk, had been Ukraine's unauthorized diversion of natural gas intended for Western Europe. The country regularly had taken the gas when its own resources ran short. Much of the friction over the matter came from recent insistence by Gazprom, the Russian natural gas monopoly, that Ukraine continued to steal from the gas pipeline even as Kyiv denied the charges, having earlier admitted that until May it had diverted up to 10 billion cubic meters.

In Miensk the two sides seem to have found agreement. On December 1 Russian Prime Minister Mikhail Kasianov said that he now trusts Ukraine's declarations.

"We are certain that the Ukrainian leadership will not allow the unauthorized siphoning of gas," said Mr. Kasianov, who emphasized that there was no evidence that any gas had been diverted since May.

The two prime ministers agreed that in the future Ukraine would pay for half the Russian natural gas with cash and that half would be deferred for eight to nine years. The two government leaders also announced a 10-year deferment for Ukraine on its current natural gas debt, which today stands at about $1.5 billion, according to Mr. Yuschenko.

Mr. Kasianov emphasized that private commercial enterprises and not the Ukrainian state would hold responsibility for outstanding loans after restructuring details are worked out, with Ukraine acting simply as a guarantor. Specific terms of the method of deferred payments and the debt restructuring will be worked out in the near future, both parties said.

Under the arrangements already agreed upon, Russia will pay compensation if it delays or fails to provide the promised energy. If Ukraine should miss a payment by more than two months for new gas supplies, that debt will become an interest-free technical credit. If the scheduled payment continues to be delinquent, it will become part of Ukraine's national debt to Russia. Russia will be able to utilize the national debt fund to take part in the privatization of Ukrainian property.

Ukraine currently consumes 78 billion cubic meters of gas - of which only some 18 billion cubic meters are produced within the country.

While in Miensk, Prime Minister Yuschenko and the Ukrainian delegation signed 13 of 20 documents presented for approval to the CIS heads of government meeting, one of which Mr. Yuschenko said he believed would spur speedy creation of a free-trade zone on CIS territories that Ukraine has pushed for several years, according to Interfax-Ukraine.

Among the documents that Mr. Yuschenko did not sign, was one that would have provided funding for the creation of a CIS integrated air defense system in 2001.

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