Russia, Ukraine Report Gas Talk Progress

KIEV, Ukraine -- Ukraine and Russia on Sunday reported that “significant progress” in talks between their two presidents on Saturday may potentially pave the way for a deal on natural gas prices later this year.

President Viktor Yanukovych

The development comes three weeks before a deadline was set to expire for reaching the deal.

Ukraine set the October 15 deadline after Russia had refused to compromise on the issue for more than 18 months.

Few details were available on proposals that Ukraine made during the meeting between President Viktor Yanukovych and his Russian counterpart Dmitry Medvedev at his residence in Zavidovo near Moscow.

Yanukovych was expected to offer a 33% stake in Gazprom, on par with a stake to be offered to a European company, in a trilateral joint venture to be created to operate its natural gas pipeline network that moves Russian gas to Europe, according to a Ukrainian source.

Ukraine was hoping the plan would encourage Russia to lower price of its natural gas sold to Ukraine to about $230/1,000 cubic meters, down from about $350/1,000 cu m currently.

But Russia was expected to press for at least 50% stake in such a joint venture, in which the other 50% would be owned by Ukraine, with no stakes offered to European companies, according to a Russian source.

“The considerable progress was reached at the talks providing ground for hope that concrete results will be achieved in the near future in the interests of both countries,” the Yanukovych administration reported in a statement on Sunday.

The statement was released a day after the talks between Medvedev and Yanukovych.

Ukrainian Energy Minister Yuriy Boyko met Gazprom CEO Alexei Miller on Sunday to follow up on the talks between Yanukovych and Medvedev, later leading to positive comments from the Russians.

“Gazprom chief informed the Russian President that considerable progress was achieved in discussions over issues of shipments of gas to Ukraine, allowing counting on agreements in the interests of both parties,” Interfax reported Sunday citing Natalia Timakova, a spokeswoman for Medvedev.

The talks between Yanukovych and Medvedev were aimed at averting a potential showdown between Ukraine and Russia later this year after both presidents had issued several warnings.

Yanukovych in early September threatened to appeal to international courts to abrogate the “unfair and enslaving” 10-year natural gas agreement with Russia signed in January 2009.

Ukraine also suggested it would seek to reduce Russian gas imports to 7 billion cubic meters annually within the next five years, down from 40 billion cu m to be imported in 2011.

But Medvedev, in response, warned that any unilateral action by Ukraine to cancel the 2009 agreement would lead to “serious consequences” for the Ukrainian economy.

Kostiantyn Hryshchenko, Ukraine’s foreign minister, said it was in Russia’s best interest to lower the gas prices, or otherwise Ukraine would seek to switch to alternative sources of energy, such as domestically extracted shale gas and liquefied natural gas imported from Azerbaijan.

“Is it in Russia’s interests to have too high gas price?” Hryshchenko said in an interview with Inter television before the Yanukovych-Medvedev talks. “No.”

“That’s because the higher the gas price the less of it we’ll be importing from this source. And, eventually, we will switch to other sources.”

Source: Ukrainian Journal