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Financial Times, UK : Moscow and Kiev can both claim victory

01/05/2006 | Correct

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Moscow and Kiev can both claim victory
By Neil Buckley in Moscow and Tom Warner in Kiev
Published: January 4 2006 21:36 | Last updated: January 4 2006 21:36


Russias President Vladimir Putin and his Ukrainian counterpart, Viktor Yushchenko, can both turn to their domestic audiences after Wednesdays agreement on gas prices and say that, within the bounds of this dispute at least, they scored a victory.


Mr Putin can claim Russias robust tactics shifted its energy relations with Ukraine on to a market footing whatever damage may have been done to its international image as a reliable energy supplier and that Gazprom, the Russian natural gas giant, got the price it was looking for.

Mr Yushchenko can say Ukraine faced down its big neighbour despite overwhelming pressure and made a deal rather less onerous than what was on the table before Russia cut off its gas on January 1.

Gazprom will sell its gas for export to Ukraine for the $230 per thousand cubic metres it demanded though it will sell it no longer directly to Ukraine but to an intermediary company, RosUkrEnergo.

Ukraine, by the same token, will not be paying $230 per thousand cubic metres to Russia. RosUkrEnergo will mix gas from Russia with larger volumes of cheaper gas from Central Asia, mostly Turkmenistan.

That means Ukraine will pay around $95 per thousand cubic metres to RosUkrEnergo for its imported gas. The $95 price, though more than 50 per cent above the price Ukraine was paying last year, is exactly what officials in Kiev said they had been holding out for.

The company that makes the sums add up for Moscow and Kiev is half-owned by Gazprom and half by unnamed individuals, and already acted as intermediary on Ukraines natural gas supply contract from Turkmenistan. As well as in future handling all imports of gas to Ukraine, it will take over all exports of Central Asian gas via Russia.

Gazprom had planned to buy that Central Asian gas and export it itself to Europe, but sacrificed that aim to allow yesterdays deal to be stitched together.

RosUkrEnergo will buy most of its gas in Central Asia for $50 per thousand cubic metres. Since it will sell some into the European market beyond Ukraine, where prices are more than $250 per thousand cubic metres, it can afford to pay the high price for Russian gas, sell to Ukraine at $95 per thousand cubic metres, and make a profit, said Wolfgang Putshchek, a RosUkrEnergo executive.

Russian officials said the price for its gas to RosUkrEnergo would be adjusted quarterly according to the same mechanisms used to set prices for other European customers, based on a basket of prices of alternative fuels. That meant Gazprom would now be supplying gas meant for Ukraine at market prices.

Analysts in Kiev said the price increase to Ukraine from an average of about $60 per thousand cubic metres last year would be difficult but not impossible for Ukrainian industry to bear.

Ukraine will collect increased transit fees for Russian gas heading through the pipeline across its territory to Europe. After taking into account the extra transit income, analysts said, Ukraines gas import costs would go up by less than $20 per thousand cubic metres and would remain the lowest in Europe after Russia and Belarus.

http://news.ft.com/cms/s/e0168aae-7d62-11da-875c-0000779e2340.html

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  • 2006.01.05 |

    Correct :

    > After taking into account the extra transit income, analysts said, Ukraines gas import costs would go up by less than $20 per thousand cubic metres and would remain the lowest in Europe after Russia and Belarus.

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    , 20 .

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    • 2006.01.05 |

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