Ukraine Rejects Putin's Eleventh-Hour Natural Gas Price Offer

KIEV, Ukraine -- Ukrainian President Viktor Yushchenko rejected Russian President Vladimir Putin's eleventh-hour proposal to delay a fivefold increase in natural gas prices, which may lead OAO Gazprom to stop supplying the fuel to the former Soviet republic tomorrow.

Ukraine's President Viktor Yushchenko looks on during a meeting with energy officials in the control centre of Ukraine's pipeline operator in Kiev December 31, 2005. Russian President Vladimir Putin offered Ukraine a three-month reprieve in a bitter gas price dispute on Saturday, but only gave Kiev until the end of the day to strike a deal.

"We can't accept a price of $230'' per thousand cubic meters, Ukrainian government spokesman Valentyn Mondrievsky said in a telephone interview from Kiev less than two hours after Putin's proposal was broadcast on Moscow-based Gazprom's NTV television network.

"We support Russia's proposal to switch gas prices to the market, but the price shouldn't look like economic pressure,'' Yushchenko said in an e-mailed statement.

State-run Gazprom, which supplies a quarter of Ukraine's gas and uses the country's pipelines to supply a quarter of western Europe's, plans to shut off supplies to Ukraine at 10 a.m. tomorrow if the nation doesn't agree to pay $230 per thousand cubic meters, up from $50 now.

Putin told a meeting of his Security Council today that "our Ukrainian brothers'' could buy gas in the first quarter of 2006 at the old rate if they signed a contract today to switch to "market prices'' in April. The meeting was attended by Gazprom Chairman Dmitry Medvedev, who is also Russia's first deputy prime minister, and Chief Executive Officer Alexei Miller.

In his statement, Yushchenko proposed that Gazprom freeze the gas price "for a period of time'' and that a committee of officials from the two nations be set up in the next 10 days to discuss the price.

Western Europe

Both sides have said Gazprom's exports to western Europe won't be affected by a cut off, which is scheduled to be shown live on various Russian state-run channels, including NTV.

Yushchenko, who Putin campaigned against in Ukraine's controversial presidential election a year ago, has said Ukraine is prepared to switch to market prices, though not as quickly as Russia wants. "What Russia expects for its gas "is completely unacceptable" and "economically groundless," he said in a televised address the nation last night.

"Why does Turkey pay $100 per thousand cubic meters, the Baltic countries pay $110, the Caucasus pays $100, and Ukraine, which is Russia's closest neighbor, must pay $230?''

Yushchenko last week rejected an offer from Putin to loan Ukraine $3.6 billion to help meet the higher price, saying his country doesn't accept "alms".

`Ready'

Dmytro Marunich, spokesman for NAK Naftogaz Ukrainy, Ukraine's national oil and gas company, said the country was ready for supplies to be cut. "We expect Gazprom to cut off the supply to Ukraine tomorrow if the Ukrainian government doesn't offer Russia anything," Marunych said via telephone earlier today. "Ukraine's ready for that.''

Russian and Gazprom officials have said they want to end Soviet-era subsidies and move toward a free market for natural gas.

Source: Bloomberg

Comments

Anonymous said…
WE WON'T BE BLACKMAILED FOR LAST YEAR'S CHOICE

Dear Mr Putin, darling Vladimir,
Warmest wishes for the New Year,
A peaceful, undisturbed New Year's day,
Stop worrying if the neighbors will pay.

12 months ago we overthrew a regime
Full of cronies: crooked and mean,
The people rose from their knees
And now you want us to freeze?

Although today it's rather cold
The pipeline will not be sold
The people in Ukraine are strong
and will overcome evil and wrong.

We wish you warmth and delight
May your New Year's day be bright,
But we won't be blackmailed for last year's choice
Freedom - no more fear to express liberty's voice.
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