Yushchenko Moves to End Fuel Row

KIEV, Ukraine -- Ukraine's President Viktor Yushchenko has issued a decree blaming the government for creating a fuel crisis by trying to fix petrol prices.

Mr Yushchenko gave the economics ministry a week to remove a petrol price freeze, saying it was not in line with the principle of a market economy.

Petrol stations began running out of fuel, 80% of which comes from Russian sources, after Ukraine froze prices.

PM Yulia Tymoshenko

Prime Minister Yulia Tymoshenko had said Russian oil firms were at fault.

On Monday, Ms Tymoshenko said Russian firms, including Lukoil, Tatneft and TNK-BP, had suspended deliveries and created an "artificial crisis" in an effort to "bully" Ukraine.

However, the oil companies said repair works had restricted supplies and oil was still being pumped to Ukraine.

TNK-BP, which is jointly owned by UK oil giant BP, said it was supplying a smaller volume of crude because of work on one of its pipelines.


Mr Yushchenko's decree, issued late on Wednesday, said the crisis over fuel supplies had developed as a result of "incorrect actions" by the government, which amounted to excessive regulation of the market.

It said the government had one week to lift price caps on petrol, which did not correspond "to the basis of a market economy".

It also ordered the government to lift VAT on oil transit through Ukraine, set up a programme for a state oil reserve consisting of 10% of annual demand and start talks with other countries on oil supplies.

The problems began last month, when the Ukrainian government froze petrol prices after accusing Russian firms of conspiring to increase them.

Adding to the pressure, Moscow announced an increase in crude oil export duties from $102 (£55) to $136 a tonne, to take effect from 1 June.

With two of Ukraine's six refineries closed for repairs and maintenance by their Russian owners, petrol shortages ensued.

By last weekend, petrol stations throughout Ukraine - run mainly by Russian companies - were selling fuel only to drivers who had special coupons or customer cards, turning numerous cars away.


On Monday, Ms Tymoshenko said Russian companies had failed to supply 20,000 tonnes of crude oil to a third refinery, Kremenchuk, between 7 and 12 May.

"Oil deliveries to Ukraine are being deliberately stopped, even though all contracts have been paid for," she said.

"It is no more than a plot, sabotage. They want to put Ukraine in its place."

Relations between Kiev and Moscow have been strained since last year's Ukrainian "orange revolution" that resulted in victory for the pro-Western opposition led by Mr Yushchenko.

Russia had backed rival candidate Viktor Yanukovych.

The Russian authorities accuse Ms Tymoshenko, a former gas industry oligarch, of bribery and are pursuing a criminal case against her.

Source: BBC News