Kyiv signs gas deal with Turkmenistan (05/20/01)

Kyiv signs gas deal with Turkmenistan

by Roman Woronowycz
Kyiv Press Bureau

KYIV - The presidents of Ukraine and Turkmenistan signed an agreement on May 14 that will diversify Ukraine's natural gas supplies and lessen its energy dependence on Russia.

The historic document, one of nine signed in Kyiv by Ukraine's Leonid Kuchma and Turkmenistan's Saparmurad Niyazov during the latter's two-day state visit, calls for the Ashkabat government to assure the delivery of 250 billion cubic meters of natural gas to Ukraine in 2002-2006.

An obviously satisfied Ukrainian president told journalists after the signing ceremony in Mariinsky Palace not to underestimate the meaning of the accord.

"Everyone should well understand the importance of natural gas to the Ukrainian economy," said Mr. Kuchma. "Natural gas is not only the economy, it is politics and it is energy security."

He said the new agreement fully satisfies Ukraine's energy needs.

Ukraine has been almost 100 percent dependent on Russia for its oil and natural gas since independence nearly 10 years ago - and often at the mercy of Moscow's pricing whims.

The agreement came several days after Moscow announced it had appointed former Prime Minister Viktor Chernomyrdin, a natural gas tycoon who once headed the Russian gas monopoly Gazprom, ambassador to Ukraine and special envoy for trade and energy relations.

Turkmenistan will provide Ukraine 40 billion cubic meters of natural gas in 2002, which will rise to 50 billion cubic meters per year in 2003. Ukraine will continue to purchase the gas at the same price of $42 per thousand cubic meters that was agreed by President Kuchma in Ashkabat last year when he negotiated the purchase of 30 billion cubic meters of natural gas for Ukraine for this year.

The accord with Turkmenistan will also make it easier for Ukraine to control its energy debt. President Niyazov offered Kyiv an attractive payment plan in which it will be able to pay for 50 percent of the energy it purchases in the form of goods and services, including Ukrainian investment projects in Turkmenistan that should reach a value of $412 million.

In addition Turkmenistan's president expressed interest in having Ukraine become involved in a program his country is developing to create a national fleet of oil carriers, which will carry crude oil from the fields it is developing to ports on the Caspian Sea. He said Turkmenistan would like to buy five tankers initially.

Mr. Niyazov also stated his interest in receiving agricultural machinery from Ukraine, including combines, tractors and cultivators.

President Niyazov said he was in no hurry to obtain cash repayments for current debts owed by Ukraine and was willing to wait until after Kyiv settles its balance of payments accounts with the Paris Club.

"Ukraine still needs time," explained Mr. Niyazov. "Two, three months is no problem for us."

Currently Ukraine owes Turkmenistan some $420 million for past energy purchases, $40 million of that amount in trade commodities, and the rest in cash.

Even staunch critics of President Kuchma and his policies applauded the natural gas deal as an important strategic move by Ukraine. Yulia Tymoshenko, the former vice prime minister of the energy sector and a staunch opponent of the president, said it was an important deal.

"This is a victory for Ukraine," said Ms. Tymoshenko, who was a major player in the oil and gas market in the mid 1990s as chairman of United Energy Systems.

But the Russian natural gas giant, Gazprom, which currently ships about 50 percent of its supplies to Ukraine, reacted with some derision. A spokesman for the company, in which Russia has a controlling interest, called Turkmenistan a potentially unreliable partner and emphasized that relations between Turkmenistan and Ukraine have been strained historically.

"Not everything is as simple as you may want to think," said a representative of the firm's press office, according to the Kyiv newspaper Den. "Remember how it was earlier. There were constant surprises. The Turkmenbash [Turkmen leader] becomes dissatisfied and shuts down ... "

He also suggested that one should not forget that Turkmenistan's gas must traverse the territory of Russia to get to Ukraine.

However, President Niyazov was optimistic that the natural gas deal, along with the other agreements, would be the beginning of a rich, new friendship between the two countries.

"There is no area today that could not be included in our cooperation," said Mr. Niyazov, who added his country would be ready to work on a 10-year natural gas agreement beginning in 2003 that would secure Ukraine's energy needs through 2016.

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