Russia pressures Ukraine, raising prices on gas
by Yana Sedova
Kyiv Press Bureau
KYIV - In what was widely perceived as Russia again pressuring Ukraine, the Russian state-controlled gas monopoly Gazprom boosted natural gas prices for Ukraine to a European level of $220-$230 per 1,000 cubic meters from a rate of $50 per 1,000 cubic meters.
Gazprom also threatened to cut off gas supplies in case Ukraine doesn't accept these new market prices before January 1, 2006.
Ukrainian President Viktor Yushchenko said Russia used the latest gas negotiations as an instrument of political pressure, but reassured Ukrainians that the issue would soon be "yesterday's problem."
"I am sure that we will review the prices and transit fee, and reach an agreement in our mutual economic interests," Mr. Yushchenko said on December 14.
Ukraine gets 25 billion cubic meters of natural gas from Russia as a barter payment for transporting the gas to Europe, accounting for more than 31 percent of Ukraine's needed annual supply of natural gas.
The Ukrainian government has insisted on a step-by-step shift from barter transactions to money payments for natural gas. However, Gazprom representatives accused Ukraine of dragging negotiations out after Ukraine rejected a price of $160 per 1,000 cubic meters offered earlier.
"Ukraine has wasted time in these talks and now there can be no talk about $160," said Oleksander Medvedev, Gazprom's deputy board chairman. "The market situation has changed."
Russian President Vladimir Putin has asserted that Ukraine could afford market prices given that it has received money from privatizations and Western loans.
Some Russian national deputies argued that, now that Ukraine has market economy status, it must accept the market economy rules.
Higher natural gas prices affect average Ukrainians because most apartments depend on gas heat. Ukrainian metallurgical and chemical industries that depend on natural gas would also face difficulties.
National Security and Defense Council Secretary Anatolii Kinakh said Ukraine's chemical industry is already unprofitable with the price for natural gas at $95 per 1,000 cubic meters. The same applies to the metallurgical industry, which buys natural gas at $106 per 1,000 cubic meters, he said.
Industrial Policy Minister Volodymyr Shandra said Ukrainian industry will survive if it begins using coal and shifts to energy-saving technologies.
The preferential terms that Russia gave Ukrainian industry for many years will likely cease eventually, however "nothing awful will happen," Mr. Shandra said.
Top Ukrainian officials still rest their hopes on bilateral agreements that would allow the country to receive discounted natural gas from Russia for many years.
"We've got a contract with the Russian monopoly [Gazprom]," said Mykhailo Volynets, a member of the Ukrainian Fuel and Energy Complex in the Ministry of Heating and Energy. "According to this document, the [gas] price is unchangeable until 2009. I am sure that Ukraine will sue Gazprom based on this document," he added.
Meanwhile, President Yushchenko said it is necessary to launch a new energy concept for Ukraine and increase domestic oil and natural gas production on the Azov and Black Sea shelves.
"My aim is to provide for the absolute energy independence of Ukraine," Mr. Yushchenko stated.
Copyright © The Ukrainian Weekly, December 18, 2005, No. 51, Vol. LXXIII
| Home Page |