Ukraine and Russia OK gas consortium; national deputies of opposition protest deal (10/13/02)

Ukraine and Russia OK gas consortium; national deputies of opposition protest deal

by Maryna Makhnonos
Special to The Ukrainian Weekly

KYIV- The gas monopolies of Ukraine and Russia on October 7 signed a deal to create a gas consortium that would manage Ukraine's gas pipeline system. The move elicited harsh criticism by opposition lawmakers who say the pact was driven by politics and contravene Ukraine's national interests.

Under the deal signed by Russia's Gazprom and Ukraine's Naftohaz, the two companies will manage and develop Ukraine's pipeline network as equal partners.

Foreign companies also may take part in the consortium. However, the document, which was signed at a summit of presidents of former Soviet republics in Moldova, doesn't provide details about the amounts of investments for the pipelines, revenue-sharing and conditions for other parties to enter into the deal.

"The creation of the consortium may lead to a situation whereby its managers acquire turbines in Britain and pipes in Russia leaving Ukraine aside," said National Deputy Mykola Rudkovskyi, a Socialist.

Opposition lawmakers in the Verkhovna Rada said there are no economic grounds for the consortium and argued that Gazprom will take half of the gas transportation revenues that currently belong to the national budget.

The Naftohaz gas monopoly currently provides about 6 billion hrv ($1.1 billion U.S.), or some 15 percent of the government's annual revenues.

"In the consortium, these revenues won't go to the state budget," said Yurii Orobets, a member of the Rada's subcommittee on the energy sector.

The lawmakers brought their angst from the lobby to the parliamentary arena, peppering Fuel and Energy Minister Vitalii Haiduk with questions.

Mr. Haiduk, as well as other proponents of the deal, said it will be beneficial to Ukraine as it will speed repairs, build new pipelines and attract investment. However, the minister failed to support his expectations with figures, saying the "technical and economic grounds of the pact will be worked out by September 30, 2003."

Opposition lawmakers charged that President Leonid Kuchma, who faces growing pressure at home to resign, authorized the deal in order to gain Russia's political support.

Members of the largest opposition faction, Our Ukraine, led by ex-Prime Minister Viktor Yushchenko, were troubled that neither the Economy Ministry nor the Finance Ministry had approved the deal. They said they will propose the establishment of a special investigative commission to determine the true circumstances surrounding the deal.

"A political situation arose and Leonid Danylovych (Kuchma) simply gave a tsar's present from Ukraine (to Russia)," Mr. Orobets said. "He sacrifices Ukraine's national interests to protect himself ... Every day of Kuchma being in power is dangerous for Ukraine."

President Kuchma denied any political motive in the consortium. "Stop playing politics and let's do concrete business," he said, according to the Interfax news agency. "It's not about privatization of Ukrainian gas pipelines."

The Parliament may not formally intervene in the consortium deal, because it wasn't signed by governments but by commercial ventures. Nonetheless, opposition forces threatened a vote of no confidence in the government and subsequent retraction of the pact.

Under a preliminary deal signed in June, Germany was expected to join the consortium, but its role still remains unclear. According to an Interfax report of October 9 which cited an unidentified Russian government official, the next most probable participant is Germany's Ruhrgas, with whom Russia and Ukraine will share some of their partnership.

RFE/RL Newsline reported that President Kuchma and Russian President Vladimir Putin had discussed the gas consortium during a meeting in Zaporizhia on October 6 that marked the 60th anniversary of the Dniprohes hydropower station. The next day, at a summit of the Commonwealth of Independent States held in Chisinau, capital of Moldova, Prime Ministers Mikhail Kasianov of Russia and Anatolii Kinakh of Ukraine agreed on the deal.

Under the agreement, the consortium will be based in Kyiv and registered in Ukraine. Decisions regarding the participation of foreign companies will be made jointly, and the agreement will remain in effect for at least 30 years, according to RFE/RL.

Ukraine, which depends heavily on energy resources from Russia, transports about 90 percent of Russian gas supplies to the West, which constitute a quarter of Europe's natural gas.

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