Medvedev Warns Of ‘Serious Consequences’

KIEV, Ukraine -- Russian President Dmitry Medvedev on Saturday warned Ukraine of “serious consequences” if it tries to cancel its 10-year gas agreement with Gazprom by liquidating national energy company Naftogaz Ukrayiny.

Russian President Dmitry Medvedev.

Medvedev made the warning at a “brief conversation” with President Viktor Yanukovych at a CIS summit in Tajikistan, apparently skipping a full-fledged meeting requested by the Ukrainian party.

“This may lead to serious consequences for the Ukrainian economy,” the Kremlin said in a statement posted on Saturday. Medvedev urged Kiev to continue to respect the agreement even after the liquidation of Naftogaz.

The developments indicate that Ukraine and Russia failed to diffuse escalating tensions in natural gas talks, making a step closer to a major aggravation later this year, potentially disrupting Russian gas supplies to Europe.

Medvedev also dismissed Ukraine’s recent gas sector proposals as lacking “specifics,” according to the Kremlin statement.

Ukraine, which has been unsuccessfully trying over the past 18 months to negotiate lower gas prices, has last week suggested the deadlock may force Kiev to abrogate through court a controversial 10-year gas agreement signed in January 2009.

Prime Minister Mykola Azarov said Friday Ukraine may move to liquidate Naftogaz Ukrayiny, the national energy company, a move that would automatically cancel the controversial agreement, forcing Gazprom to renegotiate the new deal.

Speaking with reporters after the summit, Yanukovych said that appealing to international courts to cancel the agreement is the measure of last resort that will only be used if the parties fail to achieve a compromise.

“We are facing a situation that Ukraine is losing a lot of money,” Yanukovych said in comments released by his press service. “We cannot sit and wait without implementing active measures to somehow solve the problem.”

Yanukovych argued that an agreement signed between the two governments and ratified by both countries’ parliaments in 2004 calls for defining annual volumes of gas imports and gas prices between Ukraine and Russia.

But the controversial agreement negotiated by then Prime Minister Yulia Tymoshenko and Russian Prime Minister Vladimir Putin, and signed in January 2009 between Naftogaz Ukrayiny and Gazprom, violates the 2004 agreement.

“If Russia does not agree with this, we, of course, will have to appeal to the international court,” Yanukovych said. “But I hope that we have enough wisdom to find a joint decision without the court.”

Yanukovych also warned Russia against putting pressure on Ukraine, and said as the president he will do what it takes to prevent this.

“Our position is based on principle and any pressure in these conditions is humiliating,” Yanukovych said. We will not let them talk to us like that.”

“First, they drive us into the corner and then dictate conditions,” Yanukovych said. “This today humiliates not me personally, but the country, and I cannot let this happen.”

Yanukovych has been seeking to use the summit occasion to meet Medvedev to discuss the natural gas sector after both governments have exchanged warnings and threats of escalation, Azarov said Friday.

As Russia refused to lower gas prices over the past 18 months of talks, Ukraine reacted last week by announcing plans to cut Russian gas imports by 66% over the next five years, including 33% cut to 27 billion cubic meters as soon as in 2012.

But Gazprom of Russia responded with a threat of sanctions in the event that Ukraine moves to reduce its gas imports to below 33 Bcm/year.

Ukraine set a deadline of October 15 for reaching the gas deal with Russia and warned that the country may move to cancel the existing gas agreement.

Yanukovych earlier on Friday ordered the government to get ready by October 1 to liquidate Naftogaz Ukrayiny and to create several independent entities.

The move would automatically cancel all agreements, including the controversial agreement with Russia signed in January 2009.

Source: Ukrainian Journal


Matthew Dubas said…
Let us not forget the Kharkiv agreements that sold Sevastopol to the Russians until 2045. Thanks Yanuk! The agreements neither lowered the price of gas long term, nor did it strengthen the sovereignty of Ukraine. As president, how is this action justified? All we can hope for is less collateral damage in these recent negotiations.