PM: Russian Gas Price ‘Killing’ Ukraine

KIEV, Ukraine -- The high price of Russian natural gas is “killing” Ukraine, but the government will stay away from portraying Russia as an enemy, Prime Minister Mykola Azarov said Thursday.

Mykola Azarov

“We are supporters of good neighborly relations with Russia,” Azarov said speaking with World War II veterans in Sevastopol, Interfax-Ukraine reported.

“We will never let ourselves make Russia an enemy like the Orange coalition government did.”

However, Azarov said Russia’s refusal to lower natural gas prices over the past 2.5 years is forcing the government to take steps that would provide energy independence.

“We can’t pay such a high price for gas,” Azarov said.

“This price is killing our economy. The prices like that are slowing down our economic growth and letting blood out of our economy.”

“So, in a situation like this we are forced to take measures to develop our own energy base,” Azarov said.

Ukraine has been trying over the past 2.5 years to persuade Russia to lower gas prices to between $230 and $250 per 1,000 cubic meters, down from $431/1,000 cu m it currently pays.

Ukraine is expected to pay about $432/1,000 cu m for imported Russian gas in the first quarter of 2013, according to the Energy and Coal Industry Ministry.

Ukraine, which imported 40 billion cubic meters of Russian gas in 2011, plans to reduce the imports to 27 billion cu m in 2012 and to 24.5 billion cu m in 2013, according to Energy and Fuel Minister Yuriy Boyko.

Ukraine may stop importing Russian gas completely in 10 years, according to Azarov.

Meanwhile, Russia has suggested Ukraine to join Moscow-based trade bloc, known as the Customs Union, in order to qualify for lower gas prices, he said earlier this month.

Ukraine’s gas price would drop to $160/1,000 cu m after the joining of the Customs Union, but Azarov said this would undermine Ukraine’s plans to sign a free trade agreement with the European Union.

The Customs Union, which includes Russia, Belarus and Kazakhstan, is responsible for up to 40% of Ukraine’s annual trade turnover, while the European Union accounts for 30%.

Ukraine has been actively seeking to develop its own energy sources, such as coal and shale gas, but was also investing in building a $1 billion liquefied natural gas terminal on the Black Sea and awarding licenses to explore and develop offshore natural gas deposits.

Source: Ukrainian Journal