Ukraine's Tymoshenko talks tough, Russia gas cut to EU nears

Business Materials 11 February 2008 19:34 (UTC +04:00)

( dpa ) - Ukrainian Prime Minister Yulia Tymoshenko on Monday took a hard line on Gazprom claims of a massive energy debt owed to Moscow by Kiev, less than 24 hours before the deadline for a severance of Russian natural gas deliveries to European Union consumers.

" Ukraine will not pay for gas consumed in 2007 at 2008 prices," Tymoshenko told reporters in Kiev after a cabinet of ministers meeting. "This is a decision of our government."

Tymoshenko's statement rejected warnings by Gazprom that if Ukraine did not pay an outstanding 1.5 billion dollar debt for natural gas used in the past, the Russian natural gas monopolist would shut off supplies to Ukraine on Tuesday.

Citing upstream weather difficulties in Central Asia in recent weeks, Gazprom officials have argued Ukraine's gas bill in recent months has rocketed because Gazprom sent Ukraine Russian gas priced at 307 dollars per 1,000 cubic metres, and the Ukrainians did not pay for it.

In press comments, Tymoshenko insisted that was a breach of contract, and that Ukraine is obliged to purchase fuel from Gazprom at a fixed price of 189.50 dollars per 1,000 cubic metres.

The current debt is therefore not the 1.5 billion dollars calculated by Gazprom, but rather 500 million dollars, she claimed.

Russian-Ukrainian differences on how much Ukraine should pay Gazprom for gas deliveries have been chronic for nearly two decades, but the first dispute-linked, cut-off occurred in late 2005.

Some 80 per cent of Gazprom's exports to Europe travel to market through Ukrainian pipelines. The last time gas Gazprom shut off gas to Ukraine, during a December 2005 pricing dispute, the Ukrainians siphoned a portion of gas destined for Europe as transport charges.

Retail prices as far away as France spiked as a result.

Tymoshenko's declaration, came in response to days of threats by Gazprom and a formal telegram by Ukrainian President Viktor Yushchenko to set a state policy regarding the Gazprom deadline, showed an Ukrainian government apparently unwilling to compromise in the latest row.

A Tymoshenko lieutenant on Sunday said Ukraine would pay the debt, if Gazprom agreed to exclude two middleman companies, one Swiss and one Ukrainian, from gas distribution in Ukraine.

Tymoshenko, elected on an anti-corruption ticket, has targeted Ukraine's natural gas distribution network for reform, and has called for Gazprom to sell its product directly to the Ukrainian state-owned energy company Naftohaz-Ukrainy.

The change would exclude the middleman companies, both partially owned by Gazprom, from a lucrative cash stream.

Gazprom officials have insisted Ukraine continue purchasing gas from the middleman companies, as per contracts signed in early 2006, at the end of the last "gas war" between the two former Soviet republics.

Both Yushchenko and Tymoshenko are scheduled to visit the Kremlin this month for high-level talks. Yushchenko's meetings with Russian President Vladimir Putin on Tuesday coincide with the Gazprom deadline.

The deadline for the gas switch off would be for the sake of the Putin-Yushchenko talks be delayed from Tuesday morning to Tuesday evening, Korrespondent magazine reported.

Yushchenko and Gazprom chairman Aleksei Miller discussed the impending cut-off on Monday by telephone. Gazprom would be willing to cut out middleman companies, if there were "a proper price set" for gas delivered in the past and future, said Oleksander Shapak, a Yushchenko spokesman, Interfax news agency reported.

Sergei Kuprianov, a Gazprom spokesman speaking in Moscow, was less optimistic, saying he saw "few chances" of a resolution of the gas dispute by the time the deadline passed, according to an Ekho Moskvy radio report.