Ukraine And Russia At Loggerheads Over Gas Volumes

KIEV, Ukraine -- Ukraine and Russia locked horns on Wednesday over Kiev's plans to cut its demand for gas, in a scenario reminiscent of previous spats that temporarily halted Russian gas flows to Europe.

Ukraine is trying to ease pressure on state finances by reducing gas import volumes as it becomes increasingly pessimistic about getting Russia to cut the price of its gas supplies.

The former Soviet republic, which relies on Russian gas imports to power its chemical plants and heat homes, has been attempting for more than a year to renegotiate a 2009 gas deal with Moscow, which it says sets an exorbitant price for fuel.

The two sides are due to start a new round of talks in Moscow on Jan. 15.

Energy Minister Yuri Boiko told reporters Ukraine would insist on cutting Russian gas imports to 27 billion cubic metres (bcm) this year from an estimated 40 bcm last year.

"We will buy (only) as much gas as our economy needs," he said.

Gazprom says the 2009 contract obliges Ukraine to pay for at least 33 bcm a year.

"If our partners have issues (with that), they can resolve them in a civilised way," Boiko said.

He said the new talks with Moscow would last "as long as it is necessary to find an acceptable solution".

His and other comments marked a shift in tone by the Kiev government, which for most of last year projected the impression that a deal with Moscow was just around the corner.

Russia's gas exporting monopoly Gazprom was quick to respond, saying Ukraine must stick to current arrangements.

"Gazprom is concerned about today's statements that Ukraine is going to take a significantly lower amount of gas than stipulated by the contracts," Gazprom Chief Executive Officer Alexei Miller told Russian President Dmitry Medvedev.

Under the present 10-year agreement, Ukraine will have to pay $416 per thousand cubic metres of gas in the first quarter of 2012, according to a Ukrainian government source.

It sees a fairer price at $250.

The talks have failed to produce any results so far, prompting fears of disruptions in Russian gas supplies to Europe through Ukraine like those which took place during previous disputes in 2009 and 2006.

"Our Russian partners do not want to change the terms of the gas deal. They are happy with them," Ukrainian Prime Minister Mykola Azarov said in a sombre New Year's message to a government meeting in Kiev.

"But we are telling the Russian leadership: if we plan to be strategic partners, we should cooperate like strategic partners," he said.

Officials say Ukraine will compensate for lower gas imports by boosting energy production from other sources such as coal.

Russia says it will give Ukraine a discount only if Gazprom gets a stake in its transit pipeline network, something which Kiev is reluctant to allow for fears of losing leverage over its partner.

Source: QWT News