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Gazprom hits back at Ukraine's plans to scrap Naftogaz

Other News Materials 2 September 2011 16:12
Russian gas giant Gazprom chairman Alexei Miller said on Friday all existing gas agreements between Russia and Ukraine would need to be revised following the liquidation of Ukraine's Naftogaz, in a rebuff to a threat by Ukraine to scrap its main energy company and tear up its gas deals.
Gazprom hits back at Ukraine's plans to scrap Naftogaz

Russian gas giant Gazprom chairman Alexei Miller said on Friday all existing gas agreements between Russia and Ukraine would need to be revised following the liquidation of Ukraine's Naftogaz, in a rebuff to a threat by Ukraine to scrap its main energy company and tear up its gas deals, RIA Novosti reported.

"Of course after Gazprom merges with Naftogaz, [the latter] will cease to exist, there will be a liquidation period and then some time later, after all the necessary formalities become valid, a completely new company will be operating on the market. This is why all existing agreements will be revised," Miller said in an almost exact duplicate of an announcement by Ukrainian Prime Minister Mykola Azarov earlier on Friday.

Gazprom has long coveted Ukraine's gas transit system, and Russia has offered a merger of the two companies, but Ukraine has insisted such a deal would infringe its sovereignty.

Azarov said that Kiev, which is in a bitter row with Moscow over prices for gas, plans to liquidate its state-run energy firm Naftogaz, an acquisition target of Russia's Gazprom, and to revise all current agreements.

"Naftogaz as a company will cease to exist. There will be a liquidation period. Some time later, after all necessary formalities become valid, totally new companies will operate on the market. This is why all existing agreements will be revised," Azarov told reporters.

Ukraine has been trying to revise a 2009 agreement with Russian gas giant Gazprom which tied the gas price to the price for oil boosting Kiev's bill. Former Prime Minister Yulia Tymoshenko is now on trial for exceeding hesigning it.

Ukraine said on Tuesday that it would slash Russian gas purchases by a third to 27 billion cubic meters in 2012, from 40 bcm this year. However, Gazprom said that under the contract, based on a 'take-or-pay' principle, Kiev would have to pay for 33 bcm of gas regardless of actual purchases.

Azarov said that the 2009 deal violated a 2004 agreement, which says the two countries should revise the volumes of gas.

"Unfortunately, the agreement of 2004, which has an inter-state validity and is above national law, was never fulfilled. Therefore, we believe that the contracts which were signed in 2009 contradict (it), at least in the part concerning annual gas supplies," Azarov said.

Last week Russian President Dmitry Medvedev said Ukraine might get discounts for gas if joined the Customs Union of Russia, Belarus and Kazakhstan and agreed the acquisition Naftogaz by Gazprom. But Azarov said Ukraine wanted no discount, but a fair contract.

"We have all reasons to propose to the Russian government in accordance with the intergovernmental agreement (of 2004) holding talks on gas supplies and transit terms. We have sent a letter on the matter," Azarov said.

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