Putin Agrees to Ukraine Gas-Price Freeze

MOSCOW, Russia -- President Vladimir Putin ordered Russia's state-owned natural gas monopoly Saturday to supply Ukraine with natural gas at the current price for three months, if the government in Kiev immediately agreed to a big price hike to take effect later.

Russian President Vladimir Putin

Putin said in televised remarks that his offer was valid only until the end of the day. There was no immediate reaction from Ukraine, which faced a Russian threat to cut off gas supplies Sunday morning.

Putin said OAO Gazprom should continue the current price if Ukraine signed an accord Saturday accepting Gazprom's price increase starting in the second quarter. Gazprom has demanded Ukraine pay $230 per 1,000 cubic meters of gas _ more than four times the current price of $50.

Gazprom's spokesman, Sergei Kupriyanov, said Ukrainian negotiators had left Moscow Friday but the company was ready to wait for them through the end of the day to sign the contract.

Putin cast his move as a friendly gesture.

"Ukraine, above all, is a brotherly Ukrainian people, and we must think about the entire complex of relations between Russia and Ukraine," he said.

The price conflict underlined the tension between the two mostly Slavic former Soviet republics since Ukrainian President Viktor Yushchenko won a fiercely contested election against a Kremlin-backed rival a year ago. It threatened to dominate the New Year holiday, a big one in both countries.

Ukraine wanted any increase toward world-market prices to be phased in gradually, and Yushchenko said late Friday his country could now pay $80 per 1,000 cubic meters at the most.

Gazprom called the demanded price hike a long-overdue shift to free-market price mechanisms.

But Andrei Illarionov, Putin's former economic adviser, blasted it Saturday as a political move signaling the rise of neo-imperialist trends in Kremlin policy.

Illarionov said the Kremlin had asked him to help portray the price hike as a free-market measure, but he resigned this week because the move "had no relation not only to liberal economic policy, but to economic policy at all."

"Energy weapons are being used against neighbors," Illarionov said on Ekho Moskvy radio. "The move toward a policy of imperialism ... has a clear and high price that will eventually be paid by the citizens of a nation that embarks on the imperialist path."

Illarionov said that in August 2004, Gazprom signed a deal with Ukraine's gas company that envisaged five years of gas supplies at $50 per 1,000 cubic meters _ part of the Kremlin's efforts to support presidential candidate Viktor Yanukovych, who lost to the Western-leaning Yushchenko.

"When the political situation changed, they remembered about subsidies," said Illarionov, who long was a dissenter in the Kremlin, which is dominated by Putin's fellow veterans of the Soviet spy agency KGB.

Russia supplies about half of the European Union's natural gas, shipping most of it across Ukraine, and sought in advance to blame its neighbor for any disruption in supplies. It said that if it stopped deliveries intended for Ukrainian use, supplies to other countries could be restricted if Ukraine siphoned off gas meant for transit farther west.

Yushchenko's office said his Cabinet introduced measures to ensure the unhampered flow of gas to EU countries until a new contract was signed. But his prime minister said Ukraine had the right to take 15 percent of shipments through its territory as transit fees.

Source: AP

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