Yushchenko meets with Putin amid gas crisis

Business Materials 12 February 2008 15:22 (UTC +04:00)

( dpa ) - As Ukrainian President Viktor Yushchenko began a two-day official visit to Moscow on Tuesday he was faced with five hours to negotiate a solution to a debt dispute before Russian gas monopoly Gazprom cuts off deliveries.

Gazprom pushed back to 1500 GMT Tuesday the cut-off deadline for Russian gas supplies to Ukraine, if no plan was set for paying back 1.5 billion dollars in debt.

Hours of negotiation between Gazprom CEO Alexei Miller and Naftohaz chief Oleh Dubyna found no compromise while politicians on both sides were pessimistic about a solution to the latest in a series of gas disputes between the two countries.

The European Union receives 80 per cent of its gas imports via Ukrainian pipelines, but Gazprom promised Tuesday that vital supplies to Europe would not be affected.

All eyes were on Yushchenko as his official visit appeared to be the only hope for an end to a conflict in which both sides remain stubbornly opposed on the sum of the debt and who is responsible for it.

The disagreement quickly turned political after Miller sent a telegram to Yushchenko begging him to take the issue in hand.

Putin and Yushchenko were meeting for private face-to-face talks immediately after the Ukrainian president's arrival, news agency Interfax reported.

Meetings between Russian and Ukrainian diplomatic delegations also were scheduled within the framework of the one-day state visit.

The present row between Ukraine and Russia on gas payments stems in large part from an attempt by Yushchenko's government to exclude two middleman companies partially owned by Gazprom, which enjoys monopoly rights to sell natural gas in Ukraine.

Gazprom officials on Monday said a change in the terms of the delivery contract might be possible, but Ukraine needed to pay up its debt first.

Ukrainian officials said it was unlikely the Putin-Yushchenko talks would resolve the dispute fully, as detailed negotiations were necessary to determine the precise size of the debt - a task complicated by the fact that Gazprom markets not only relatively expensive Russian gas, but cheaper Central Asian gas to Ukraine.

"We have a clear legal basis showing the difference in prices (between Russian and Central Asian gas), and I think that will give us powerful arguments with the Russian Federation," said Raisa Bohatyrova, Ukraine's National Security Council chairwoman.

Gazprom executives for their part have argued the present Ukrainian debt stems from Russia's selling Russian, not Central Asian, gas to Ukraine in recent months, as a result of poor weather in Central Asia.

Russo-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 came only in late 2005.

Gazprom in December 2005 declared Ukraine shut off from gas supplies because of a pricing dispute, but continued to sent reduced volumes of gas into Ukrainian pipelines so as continue fuel deliveries to EU consumers.

The Ukrainians retaliated by siphoning a portion of the gas destined for Europe as transport charges. Gas retail prices as far away as France spiked as a result.