“We have been waiting for a relapse to begin with. Even when the original deal was done back in January, we were noting that Ukraine’s economy is in terrible shape and not getting better and it almost seems a matter of time before they have to go back to the table to renegotiate something else,” Ron Smith, chief strategist at Alfa Bank, told New Europe telephonically from Moscow. “We are watching it on a month-to-month basis and at some point something’s gotta give — it may well be Russia giving them more credit, selling them gas on credit, whatever, but I think both sides would want to avoid having another shut down of gas.”
Tymoshenko’s bitter rival, Ukraine’s President Viktor Yushchenko said that Ukraine and Russia should return as soon as possible to the issue of establishing a market price on natural gas and its transit, Nezavisimaya Gazeta reported on May 29. Yushchenko, who is scheduled to visit Russia in early June, stressed once again that the January Ukrainian-Russian gas agreements are unacceptable for him both politically and economically.
Ukraine agreed to a transfer to market gas prices. It would be correct considering the simultaneous introduction of a market price on gas transit, Yushchenko said. In this case, nobody would comment on the gas price, even that determined by the formula that is assessed as the most imperfect in Europe by many experts, he claimed. “However, during the talks, the Ukraine side, probably, following, first of all, political reasons, left the transit price at the level that was three years ago.
What results did it lead to? As early as in the first quarter, the Russian gas transit became unprofitable for us,” Yushchenko stressed as the long-running dispute between Moscow and Kiev over gas continues.
Russian gas monopoly Gazprom CEO Alexei Miller said on May 26 it fears that Ukraine will not pay in full for May gas supplies and threatened to make Ukraine’s national gas company Naftogas Ukrainy pay in advance for supplies. Two weeks ago, Putin and Tymoshenko failed to agree how Ukraine’s underground storage facilities would be filled and who would pay for this.
Russian President Dmitry Medvedev urged the EU to help with the bills during the EU-Russian summit at Khabarovsk on May 21-22. Putin also called European Commission President Jose Manuel Barroso on May 29 to warn him of difficulties he anticipates in payments coming from Ukraine to Gazprom. Barroso said the EU’s top leaders are set to discuss the Russia-Ukraine gas issue at a summit on June 18-19.
Barroso’s comments came a day after Italian Prime Minister Silvio Berlusconi said he would put forward at the next European Council meeting Russia’s proposal to have the EU pay part of Ukraine’s gas bills. “It’s been obvious for a few weeks, even months, that Italy is partnering up with Russia. I think they see it in their interest, which is one of the problems the EU as a political body has always had – it’s a collection of sovereign countries and their interests will diverge substantially,” Alfa Bank’s Smith told New Europe.
He reminded that Italy’s ENI and Gazprom plan to double the capacity of the South Stream pipeline. “Between that and Nord Stream suddenly the need to transit through Ukraine becomes questionable,” Smith said.
He said the deal might be partially in response to an EU-Ukraine agreement signed in March to modernise Ukraine’s gas transportation system without Russia’s involvement, which angered Moscow. According to Smith, Russia may say something along the lines of “Okay, if you want to pour a few billion dollars in upgrading the Ukrainian gas system feel free, it may not be necessary because we may be able to bypass it entirely.”
Source: New Europe